The company is mainly engaged in passenger and cargo shipping business in Bohai Bay, and recently signed a cooperation agreement with Yantai Free Trade Zone to enter cross-border e-commerce between Japan and South Korea. Although the specific layout of cross-border e-commerce business is still under preparation, taking into account the company's advantages in location, cost, channels, logistics, mode and other advantages of engaging in cross-border e-commerce in Japan and South Korea, at the same time, it is expected that the domestic hundreds of billions of cross-border e-commerce import retail market will maintain rapid growth, we believe that the company's entry into cross-border e-commerce is expected to completely open up the future growth space and give a "buy" rating for the first time.

The company focuses on Yantai-Dalian route operation, Bohai Bay water transport leading position is stable. Bohai Bay is geographically C-shaped, Dalian and Yantai respectively occupy the two ends of the C, land and sea distance between the two places at 9:1 Prida, very suitable for waterway rolling services. Yanlian route is the most important waterway for Bohai ferry. The overall growth of passenger / vehicle volume is steady. In the past five years, CAGR is 9% and 4%, and the market share in Bohai Bay is as high as 60%. It has a solid leading position. The company's passenger and cargo rolling transport business can be similar to the "water highway", connecting the two places, charging according to cars and people, steady cash flow, business with road toll characteristics.

Join hands with Yantai Free Trade Zone to cut into Japan and South Korea cross-border e-commerce, multiple advantages to ensure the smooth development of cross-border e-commerce import retail business. The company may be the first to benefit from cross-border e-commerce import retail business. The company has the following advantages in carrying out bonded commodity retail: 1) location advantage, the company is adjacent to South Korea and is already engaged in shipping business to and from Korea, and purchasing goods from Korea has the advantage of logistics cost and efficiency; 2) the company will set up an offline experience store and pick up area for bonded goods in the bonded area. as the bonded area is close to the core business area, it is feasible to embed bonded goods shopping into Yantai tourism industry chain. 3) Channel advantage, Yantai has frequent trade with Japan and South Korea, while the company has many years of experience in cruise duty-free shops and Korean shipping business, and has a certain product channel advantage in Korean imported goods; 4) cost advantage, rent reduction, cross-border e-commerce tax rates superimposed companies directly from Japanese and Korean manufacturers, the cost advantage is expected to enable the company to provide consumers with lower prices than overseas duty-free shops.

Cut into the cross-border e-commerce business, the company has more than twice the growth space. Simply measure the profits of cross-border e-commerce retail import business: 1) offline channels (offline experience + online orders + offline pick-up), which can be compared with duty-free shops in the city. According to the 87 million tourists in Yantai City and the company's 3 million waterway tourists, assuming that the shopping rate is 4% up to 15%, the customer unit price is 1500 yuan / 2000 yuan, and the net business interest rate is 10%, it is estimated that the company's offline channels are expected to achieve revenue / net profit of 6 billion / 600 million yuan; 2) online channels (online orders + express delivery to home) can be comparable to daily direct mail. We predict that the import retail sales of China's cross-border e-commerce will increase by 30% to 140 billion yuan in 2020. assuming that the company's online channel can achieve a 3% market share and a net interest rate of 10%, the online channel can achieve revenue / net profit of 4 billion / 400 million yuan. To sum up, cross-border e-commerce import retail may bring incremental revenue of 10 billion for the company, incremental net profit of 1 billion yuan (the company made a net profit of 400 million yuan last year), and the company's performance has more than twice the growth space.

Risk factors: the impact of the epidemic exceeded expectations; maritime transport safety accidents; cross-border e-commerce business was not as expected.

Investment advice: entrenched in the Bohai Bay, which is naturally suitable for waterway transportation, the company continues to cultivate the traditional main business passenger roll transportation, the annual performance and cash flow are stable, and the business has the characteristics of "highway". In the context of the epidemic accelerating consumption online and consumption return, the company has joined hands with Yantai Free Trade Zone to cut into the cross-border market between Japan and South Korea, and we believe that the company's entry into cross-border e-commerce is expected to completely open up room for future growth. Based on the assumption that the import retail business of cross-border e-commerce will begin to share performance next year, we forecast that the company's return net profit in 2020-21-22 will be 240 million / 500 million / 720 million yuan, corresponding to EPS forecast 0.52 yuan 1.06 PE, and the current price corresponding to 34-17-12 times. As the company cuts into cross-border e-commerce and the growth path is restructured, the valuation will be raised. We will give a short-term target value of 32 yuan according to 30 times PE next year, covering the "buy" rating for the first time.