The performance report predicts a 7.4% year-on-year increase in profit in 2018. Ningbo Port announced the 2018 performance report: According to preliminary accounting, 2018 operating income increased 21% year on year to 21.9 billion yuan, and net profit increased 7.4% to 2.87 billion yuan, slightly exceeding expectations. After deducting one-time factors (in 2018, the merger of Yining Terminal under different controls mainly brought in revenue of $270 million, while 2017 included consolidated income of enterprises not under the same control of $430 million), net profit after deducting non-attributable net profit increased by 10.3% to $2,563 billion. Revenue increased 6% in the fourth quarter, a slowdown from the growth rate of the previous three quarters (26%), mainly due to the fact that Suzhou Modern Container Terminal and Gangji Terminal were newly included in the merger scope on June 28 and August 1, 2017, respectively, and the warping effect disappeared by the fourth quarter; net profit increased 28% in the fourth quarter, mainly due to a low base due to one-time factors in the fourth quarter of 2017, and a 14% increase in non-net profit in the fourth quarter, driven by increased throughput. Key points of interest The throughput of major container hubs is growing faster than average, but looking ahead, they may face uncertainty. According to preliminary statistics, the company expects to complete a container throughput of 27.95 million TEUs in 2018, ranking third in the world and second in China, with a year-on-year increase of 7.6%, faster than the national coastal port average (the cumulative growth rate in the first 11 months was 5.3%), mainly due to the hinterland economy and the company's hub port status. Looking ahead, the global economic growth momentum may show a slowing trend, and the European and US PMI has declined rapidly from a high level. As a result, the uncertainty facing external demand has increased, or it may have a negative impact on the growth rate of container throughput. The container handling business volume contributed 37% of the company's gross profit (2017), and part of the integrated logistics and related business (contributing 33% of gross profit in 2017) was also related to the container business. Bulk cargo throughput performance was relatively stable. In addition to containers, the company's main products include iron ore, crude oil, and other goods, which contributed 11%, 4%, and 14% of gross profit in 2017, respectively. In the first half of 2018, the company's iron ore, coal and crude oil handling volume increased by 3.1%, 3.7%, and remained flat. Among them, iron ore throughput increased when China's iron ore imports fell 1.5% year on year in the first half of the year, mainly due to the fact that the production capacity of Mulanghu Ore Terminal entered a mature period, with the advantage of normalized berthing capacity for 400,000-ton ore ships. Valuation and recommendations Since the fourth quarter results exceeded expectations, we raised our 2018 profit forecast by 12% to 2,868 billion yuan, kept the 2019 profit forecast of 2,896 billion yuan unchanged, and introduced a 2020 profit forecast of 3,090 billion yuan, corresponding to a profit growth rate of 7%. Currently, the company's stock price corresponds to a price-earnings ratio of 15.8 times in 2019. We maintain a neutral rating, but as profit growth slows down and the valuation multiplier is lowered, the target price was lowered by 18% to RMB 3.96, corresponding to the price-earnings ratio of 18 times in 2019, and 14% upward space. Risk throughput falls short of expectations, and costs are rising.