On September 4, 2020, the company released throughput data for August. In the first 8 months of 2020, the company completed cargo throughput of 17.85 million tons, +18.67% year-on-year; completed container throughput of 3.248,000 TEUs, +30.49% year-on-year. In August 2020, the company completed cargo throughput of 2.596 million tons, +23.93% year-on-year; completed container throughput of 492,000 TEUs, +35.07% year-on-year. The monthly growth rate also ranked first. Compared horizontally with other major coastal ports that publish monthly data, Beibu Gulf Port continues to maintain a sharp lead in throughput growth, and the characteristics of structural growth are clear. Other ports that published August throughput data: Guangzhou Port announced that it is expected to achieve cargo throughput of 444.99 million tons in August 2020, +5.0%; container throughput of 1.906 million TEUs, +7.6% year-on-year; Ningbo Port announced that it is expected to achieve cargo throughput of 7.569 million tons in August 2020, +9.78% year-on-year, and container throughput of 2.888 million TEUs, +7.59% year-on-year. According to the official website of SIPG, in August 2020, Shanghai Port completed cargo throughput of 466.22 million tons, +2.1% year-on-year, and container throughput of 3.93 million TEUs, +1.2% over the same period last year. Beibu Gulf Port is the last developed Bay Area and a frontier position for opening up to the outside world in the future. Starting from a low base, there is huge space. Due to the lack of inland rivers with sufficient navigability in the Beibu Gulf port area off Guangxi and the inland, and in the past, railway freight rates from southwest China to Beibu Gulf Port were high, so the vast central and western regions were unable to fully benefit from the convenient shipping advantages of southwest China in the past. This not only limited the development of the central and western regions in terms of import and export trade, but also limited the growth in the throughput of Beibu Gulf Port. As the last developed Bay Area, and as the most convenient port for access to the sea in the entire Midwest, the three ports of Qinbeifang in Beibu Gulf had a throughput of 260 million tons in 2019, far less than the 1.68 billion tons in Guangdong Province, 1.61 billion tons in Shandong Province, 2.55 billion tons in Bohai Bay, 2.33 billion tons in the Yangtze River Delta, and 590 million tons in Fujian Province. In recent years, the following two trends have been obvious: ① In recent years, the central and western regions of China are undertaking a large number of industrial transfers in steel, non-ferrous, light industry, chemical and other industries due to their advantages such as low factor costs, preferential national tax policies, and industrial transfer policy guidance. The economy will usher in rapid development. The high growth rate of electricity consumption, crude steel production, and electrolytic aluminum production in the central and western regions over the past three years has verified this trend to a certain extent. ② In 2019, the National Development and Reform Commission issued the “Western Land and Sea New Corridor Master Plan” to guide railways to reduce freight charges from north to south to Beibu Gulf Port, and establish an inter-ministerial joint conference system led by the Development and Reform Commission, the Ministry of Foreign Affairs, the Ministry of Industry and Information Technology, the Ministry of Natural Resources, the Ministry of Transport, the Ministry of Commerce, the People's Bank of China, customs and other departments and relevant enterprises to promote the construction of new land and sea corridors in the west in an integrated manner and resolve existing problems in a timely manner, strengthen inter-provincial consultation and cooperation, improve freight efficiency, and improve freight efficiency. The transportation structure in the central and western regions is facing major adjustments. In the past, it took at least 22 days for a container from Chongqing to Singapore via the Yangtze River, while it only took about 7 days for a container from Chongqing to Qinzhou to be loaded to Singapore via rail and was less affected by the weather. The determined transportation schedule and shortened time consumption are the key to the future participation of China's central and western regions in the international division of labor. Benefiting from the westward shift of China's internal industry, the adjustment of the freight traffic structure in the central and western parts of China, and the development of ASEAN, the throughput of Beibu Gulf Port will soon be anchored from the current low base. Investment advice: The value of Beibu Gulf Port is clearly underestimated. Under careful assumptions, the company's DCF valuation is about 35.4 billion yuan, reaffirming the “buy” rating given to the company since the end of 2019, and given the company a target price of 21.6 yuan/share for the first time. Maintaining the company's profit forecast, the company's net profit to the parent is estimated to be 11.7/14.5/1.74 billion yuan in 2020-22, corresponding to EPS of 0.72/0.89/1.07 yuan, respectively. According to the closing price of 10.52 yuan/share on September 4, 2020, the corresponding PE is 14.7/11.9/9.9 times, respectively. We forecast the company's DCF valuation based on the following assumptions about the company's volume and price: volume: on the container side, according to the requirements of the “Western Land and Sea New Corridor Master Plan”, the container throughput of Beibu Gulf Port will reach 1,000 TEUs by 2025; in terms of dry bulk, with reference to 2014-19 data, we believe that the future development of the southwest economy and the successive commissioning of key engineering projects will drive throughput to maintain double-digit growth for at least the next five years. It is expected that by 2024, the company will achieve cargo throughput of about 4.6 million tons, with a CAGR of 14.4% in 2019-24, of which container throughput will reach about 9.7 million TEUs and a CAGR of 18.6%. After the company's cargo throughput reaches about 730 million tons until 2040, let's assume a sustainable growth rate of 0. Price: The first half of 2020 was affected by various factors such as the epidemic and policies. The company's revenue per ton fell from 18.34 yuan/ton in 2019 to 17.25 yuan/ton. Although the decline in the company's single-ton revenue is at a high level in the industry, we do not assume that the company's single-ton revenue will rise sharply in the future. We carefully assume that the company's single-ton revenue for the whole year and future will be 17.50 yuan/ton (lower than the company's level of 17.85/20.23/18.34 yuan/ton in 2017-19, respectively). Based on the above volume and price assumptions, and consider the company's capital expenses. According to the 8% discount rate generally applied in the asset-heavy industry, the discounted value of the company's equity free cash flow is 35.4 billion yuan, corresponding to a stock price of 21.6 yuan/share. Referring to the valuation of the DCF valuation method, for the first time, we gave the company a target price of 21.6 yuan/share (attached DCF valuation table and key assumptions), and reiterated the “buy” rating. Risks suggest that the macroeconomic environment may decline beyond expectations; the short-term situation in the South China Sea; and the convertible debt-for-equity price announced by short-term companies has not yet been determined.