China Merchants Port (the “Company”)'s revenue for the first half of 2020 fell 8.7% year-on-year due to the impact of the COVID-19 pandemic, which is basically in line with our expectations. The company's profit attributable to joint ventures and associated companies fell sharply by 23.6% year on year, driving the net profit of the company's regular shareholders to fall 31.1% year on year, falling short of our expectations. Including net income from land demolition compensation and other one-time profits, the company's shareholders' net profit fell 76.3% year over year to HK$1,546 million.

The company saw a strong recovery in throughput in July, but the COVID-19 pandemic is still expected to stifle throughput growth. As the global COVID-19 pandemic is still not well controlled, international trade continues to face the threat of lower demand and supply levels. The company currently has a comprehensive network of terminals, and its acquisition of the remaining two terminals through Terminal Link is expected to be completed in the second half of 2020. Furthermore, we look forward to the accelerated development of Port Hambantota after the introduction of strategic investors. We believe there is still plenty of room for the company's throughput to grow.

The “collection” ratings were reiterated and the target price was lowered to HK$11.00 to reflect market sentiment. The company's current valuation is still being dragged down by the COVID-19 pandemic and the complicated international trade situation, and we look forward to a recovery in valuations after uncertainty subsides. We think the company's current valuation is attractive. Our target price of HK$11.00 corresponds to a net market ratio of 0.5 times, 0.5 times and 0.5 times the 2020-2022 net market ratio.