The company is a leading passenger transport enterprise in Bohai Bay, and the development of cross-border e-commerce platform with full-channel layout is expected to usher in new opportunities. 1) the company's main business is passenger and cargo rolling transportation and other businesses, among which, the revenue of passenger rolling transportation accounts for 80.6% in 2019, and the main route is Dalian-Yantai route; the controlling shareholder is Liaoyu Group (38.74% of the total share capital); the company's revenue in 2019 is 1.663 billion yuan / CAGR in the past four years is 8.9%; the net profit is 410 million yuan / 24.4% of CAGR in the past four years; and the dividend rate of the company is relatively high, and the dividend rate since listing is as high as 48.56%. 2) according to the announcement of August 6, 2020, the company has signed a "Strategic Cooperation Agreement" with the Yantai bonded Port area Management Committee, and promised to set up Yantai Comprehensive Insurance Zone Cross-Border E-Commerce Co., Ltd. before December 31, 2020, it is expected to become the first cross-border e-commerce project between China, Japan and South Korea. At the same time, set up a display store on the ro-ro passenger ship, offline integration of Yantai, Japan and South Korea tourism flow, online cooperation eight major express companies do not rule out direct mail business, is expected to bring new opportunities for the company's future development.

Join hands with Yantai Free Trade Zone to build a large express delivery channel, the full channel into the Japanese and Korean characteristics of cross-border e-commerce business has great potential.

1) with continuous policy support, the domestic cross-border e-commerce industry is growing rapidly: compared with tax-free airports, tax-free outlying islands and outbound purchases, cross-border e-commerce can buy online platforms (Tmall International, Koala Sea Shopping, etc.) anytime and anywhere; compared with personal purchasing agents and Haitao, they have the core advantages of fast delivery time and quality assurance endorsed by large platforms. With the policy support of 5 rounds of pilot city expansion, 3 rounds of liberalization of salable import categories and reduction of comprehensive import tax rates (0% tariff, consumption tax and VAT * 70%) since 2019, the transaction volume of domestic imported cross-border e-commerce in 2019 has exceeded 2.47 trillion yuan / VAT as the core channel for domestic consumers to buy overseas goods. 2) bind the bonded area + join hands with Japan and South Korea resources + cooperative express logistics, the company has great potential for the development of new cross-border e-commerce business: ① policy advantages: Yantai is a national comprehensive pilot zone for cross-border e-commerce, with an area of 30,000 square meters of cross-border e-commerce industrial park in the bonded zone, and set up bonuses for related enterprises at various levels such as rent, warehousing, operation and support to reduce the initial operating pressure. ② price advantage: according to the announcement, most goods in the comprehensive bonded area adopt a comprehensive tax rate of only 9.1%. For goods purchased centrally abroad and directly supplied by manufacturers, consumers can enjoy a lower purchase price than in overseas duty-free shops. In addition, the company has many years of experience in ship operation and ship duty-free shop operation in China, Japan and South Korea, and it is clearly pointed out in the announcement that it will build a cross-border commodity distribution center between Japan and South Korea, so it may not rule out the formation of deep supply cooperation with Japanese and Korean enterprises in the future. further expand the purchasing price advantage. ③ location advantages: Yantai Free Trade Zone faces Japan and South Korea across the sea, and connects with sea, land and air transportation hubs, which is in the best focus position of trade and logistics; in terms of transport costs, according to the announcement, the company also plans to open up cross-border e-commerce express lines to South Korea and Japan to achieve the optimal price and the fastest time limit for cross-border e-commerce goods transportation. Offline flow of ④: the company has nearly 3 million passenger flows such as rolling ships in 2019 (announcement data), of which more than 1/3 are organized by travel agencies, which has a drainage advantage for the development of "tourism + shopping". According to the announcement, the company will open a display store on each ro-ro ship and cooperate extensively with travel agencies to embed the shopping experience of bonded goods from Japan and South Korea into the Yantai tourism industry chain to ensure a rich source of customers and income for offline sales. ⑤ online direct mail:

According to the announcement, the company plans to open up cross-border e-commerce sea express lines between South Korea and Japan, and sign cooperation agreements with eight major express delivery companies to achieve the optimal price and the fastest time limit for cross-border e-commerce cargo transportation. in the future, we will not rule out the full-channel layout of offline shopping and online direct mail, which has great potential for development. 3) under relative maturity, the net profit is expected to increase by 81.3 billion yuan:

We expect that in a relatively mature state, we conservatively assume that the company's offline passenger flow is still 3 million, the corresponding medium-and long-term (5-10 years) shopping conversion rate is 30-40%, and the customer unit price is 3000,000 yuan. The corresponding offline cross-border e-commerce business is expected to increase revenue by 274.8 billion yuan; online direct mail business assumes that the number of users is 600-8 million, the customer price is 700-800 yuan, and the corresponding online business revenue is 42-6.4 billion yuan. Overall medium-and long-term (5-10 years) cross-border e-commerce business revenue is expected to be 69-11.2 billion yuan, given a comprehensive net interest rate of 12% assumption, the corresponding net profit will increase by 8.3-1.34 billion yuan.

Stock transport business: transport capacity, routes actively expand, business tentacles extend horizontally and vertically: 1) quality of routes: Bohai Bay Dalian-Yantai route is the core of the company's business, and the "Yan-Lian" route saves 1325 kilometers by water than by land. Has a significant transport distance advantage. In addition to the core routes, the company continues to expand Penglai-Lushun and Longkou-Lushun routes. In March 2020, it acquired Weihai Haida passenger Transport Co., Ltd., which is mainly engaged in Weihai-Dalian routes, and expanded its domestic routes to four lanes. And opened Yantai-Pingze route to the international in 2014. 2) leading capacity: the company has 11 large passenger and cargo ro-ro ships operating, with a total tonnage of 460000 tons and a total passenger seat of 25,000, ranking first in the Bohai Bay passenger roll transport market share of 55.6%, with an overall average age of 9-10 years, 5-6 years younger than its main competitor China Shipping. Taking into account the rising barriers to industry entry, policies to ensure high-quality competition pattern; 3) business development: horizontal expansion of cruise cargo rolling transportation, vertically involving upstream ship fuel sales, the main transport industry is expected to diversify.

Investment advice: buy-An investment rating. Considering that the company's cross-border e-commerce business is expected to start laying out this year, we estimate that the company's revenue from 2020 to 2022 will be 1.31 billion yuan / 2.13 billion yuan / 2.67 billion yuan respectively, corresponding to a growth rate of-21.4%, 62.8% and 25.6%, respectively. The net profit of returning to the mother is 245 million yuan / 500 million yuan / 738 million yuan, and the corresponding growth rate is-40.4% "104.4% cord" 47.2%. In the relatively mature state of medium-and long-term (5-10 years), it is estimated that the revenue of cross-border e-commerce business is 69-11.2 billion yuan, corresponding to the corresponding net profit of 83-1.34 billion yuan, the target valuation of 20x PE is 16.6-26.8 billion yuan, and the conservative assumption of stock business is that the corresponding income is 2 billion yuan, the net profit of return is 600 million yuan, and the target valuation of 8x PE is 4.8 billion yuan. The overall medium-and long-term (5-10 years) target market value is 21.4 billion yuan ~ 31.6 billion yuan. Give a Buy-An investment rating for the first time.

Risk tips: passenger flow is less than expected, cross-border e-commerce business layout progress is not as expected, commodity channel supplier cooperation is not as expected, macroeconomic decline, and so on.