Event: the company released a three-quarter report on October 21, 2019. From January to September 2019, the company realized operating income of 3.847 billion yuan, year-on-year + 0.09%, and net profit of 535 million yuan,-0.68%. After deducting non-return, the net profit was 465 million yuan,-13.02% of the same period last year.
Affected by the reduction of port rates, the volume of loading and unloading business increased and decreased during the reporting period, and the gross profit margin decreased compared with the same period last year. In the first three quarters of 2019, the operating income was 3.847 billion yuan, + 0.09% from the same period last year, the gross profit was 1.032 billion yuan,-8.3% from the same period last year, and the gross profit margin was 26.8%, a decrease of 2.5pcts compared with the same period last year. We judge that the main reason why the growth rate of operating income in the first three quarters of 2019 is lower than the growth rate of cargo throughput and the decrease in gross profit margin compared with the same period last year is that the revised Port charging method, which was implemented on April 1, 2019 (valid for 5 years), has lowered some of the government pricing and charging standards. The charges for cargo port charges, port facilities security fees, pilotage (berthing) fees, and tug fees for ships sailing on domestic routes will be reduced by 15%, 20%, 10% and 5%, respectively. It is expected that the negative impact of the reduction in port charges on the company's port business income growth will disappear in Q2 in 2020.
In the third quarter, the growth rate of iron ore throughput became positive compared with the same period last year, and the throughput of non-metallic ores increased greatly. The company's cargo throughput in the third quarter of 2019 was 63.88 million tons, + 9.1% compared with the same period last year. The total cargo throughput in the first three quarters was 188.87 million tons, + 4.8% compared with the same period last year, of which foreign trade cargo throughput was 150.23 million tons, + 2.7% year-on-year, and domestic trade cargo throughput was 38.64 million tons. + 13.7% year-on-year. In terms of goods, the throughput of metal ores, coal and products, timber, grain, steel and non-metallic ores in the first three quarters of 2019 was 107.24 million tons / 35.22 million tons / 17.32 million tons / 9.12 million tons / 4.15 million tons / 7.77 million tons, respectively, compared with the same period last year, which was-1.51%, 6.91%, 3.49%, 3.18%, + 1.08%, + 325.9%, respectively. Among them, the throughput of metal ore decreased year-on-year due to the insufficient supply of foreign ore and rising ore prices in the first half of the year, but with the gradual resumption of production in the upstream, the throughput and month-on-month growth rate became positive in the third quarter of 2019. The company's iron ore throughput in the third quarter of 2019 was 37.58 million tons, + 14.6% year-on-year, and + 18.6% compared with H1 (- 8.4%) in 2019. We judge that the sharp increase in non-metallic ore throughput during the reporting period was mainly due to the release of domestic alumina production capacity and the substantial increase in bauxite imports caused by the tight supply of bauxite in domestic trade.
The income from asset disposal increased the current profit, and the net profit of non-return in the first three quarters was-13.02% compared with the same period last year. In the first three quarters of 2019, the company's non-recurrent income was 93.73 million yuan (before tax), + 116.6% compared with the same period last year, mainly from 84% equity transfer and real estate transfer of foreign management companies, totaling about 89.3 million yuan (before tax).
Investment suggestion: it is estimated that the company's EPS in 2019-21 will be 0.21 yuan per share and 0.22 yuan respectively, covering the target price of 3.84 yuan per share given to the company for the first time with a "buy" rating.
In terms of cargo throughput: with the resumption of production in the upper reaches, the growth rate of iron ore throughput is expected to pick up; coal, steel, cement and other goods will maintain steady growth driven by downstream demand; in terms of revenue: it is expected that the negative impact of the reduction in port rates on the company's year-on-year revenue growth will disappear in Q2 in 2020. It is estimated that the operating income of the company in 2019-21 is about 5.18 billion yuan / 5.48 billion yuan / 5.78 billion yuan respectively, which is about + 1% Universe 5.7% Universe 5.6%, and the net profit of returning home is about 660 million yuan / 690 million yuan / 730 million yuan respectively, which is about + 1.7% / + 5.3% / + 6.4% respectively. The corresponding EPS is 0.210.220.24 yuan respectively. According to PE valuation method and PB valuation method, the target price of 3.84 yuan per share given to the company is covered for the first time, and the "buy" rating is given.
Risk hint
In the macroeconomic downturn, the throughput growth rate is lower than expected; the diversion impact of the surrounding ports; the change of port charging policy; the short-term rate of return of future consolidated assets may be lower than that of existing assets.
