Overview of the incident The company released its report for the third quarter of 2020. The company's revenue for the first three quarters was 3.816 billion yuan, +13.53% year on year, net profit to mother of 837 million yuan, +16% year over year, net profit after deducting 817 million yuan, or +15.28% year on year, with basic earnings per share of 0.51 yuan. In the Q3 quarter of 2020, Beibu Gulf Port achieved revenue of 1,392 million yuan, +21.65% year on year, net profit to mother of 313 million yuan, +26.48% year on year, net profit of 305 million yuan after deducting non-return to mother, and +26.96% year on year. The Q3 company's throughput grew at an accelerated pace, and the decline in single-ton cargo revenue narrowed compared to the pandemic, driving the company's Q3 revenue and performance growth rate to exceed expectations. The company's revenue in Q3 2020 was +21.65% YoY, 11.08 percentage points higher than Q2's +10.57% growth rate, +26.48% YoY, and 18.69 percentage points month-on-month increase from Q2's +7.79% growth rate. We determine that the main reasons are: 1) Accelerated growth in cargo throughput: In Q3, the company completed 75.72 million tons of cargo throughput, +24.2% YoY, 7.8 percentage points higher than Q2's +16.4% growth rate. Same Compared to +35.1%, the growth rate of +30.5% in Q2 was 4.6 percentage points higher than the previous quarter. 2) The decline in single-ton cargo revenue was narrower than during the epidemic: According to our estimates, Q3 companies' single-ton cargo revenue was -0.9% year-on-year, 3 percentage points narrower than the -3.9% decline in Q2, and 5 percentage points narrower than the -5.9% decline in the first half of the year. The scale effect was evident, and Q3 companies' gross margin increased year over year. Q3 Expense rates have declined, and the company's profitability has continued to increase. As an asset-heavy industry, the company's operating leverage ratio is high. As the scale of the business increases, the company's profitability continues to rise. In terms of gross margin, the company's gross margin for the Q3 quarter of 2020 was 38.8%, up 1.7 percentage points from 37.1% in the same period last year. The company's gross margin for the first three quarters was 40.4%, up 1.6 percentage points from 38.8% in the same period last year. In terms of expenses, the company's management expenses for the Q3 quarter in 2020 were 89 million yuan, +8.2% year on year, and the management expense ratio was 6.4%, down 0.8 percentage points from the same period last year, down 1.9 percentage points from Q2; financial expenses were 58 million yuan, +28.6% year on year, and the financial expenses ratio was 4.2%, up 0.3 percentage points from the same period last year and 0.1 percentage points from Q2. Overall, the company's expense ratio showed a downward trend, and profitability continued to increase. The company's net interest rate for the Q3 quarter of 2020 was 24.46%, which was an improvement over the previous year. Investment advice: The accelerated growth in Beibu Gulf Port's Q3 performance further validates the company's investment logic and is expected to make the market's expectations for steady growth in the company's performance more stable. We are firmly optimistic about the company's long-term steady growth in the context of the “three structural adjustments”. We expect the full year of 2020 to show a trend of low and high performance, maintain the company's profit forecast, reaffirm the target price of 21.6 yuan/share, and reaffirm “purchase.” We believe that in the third quarter, when the decline in the company's single-ton cargo revenue narrowed compared to the pandemic, the increase in cargo throughput boosted the company's revenue and profit growth more fully, further verified the company's investment logic, and helped stabilize market expectations for long-term growth in the company's performance. We maintain the company's net profit forecast of 11.7/14.5/1.74 billion yuan for 2020-22, respectively. The corresponding EPS is 0.72/0.89/1.07 yuan, respectively. Refer to the closing price of 10.17 yuan on October 27, corresponding to the 2020-22 PE ratio of 14.2/11.5/9.6 times, respectively, reaffirming the target price of 21.6 yuan/share and reaffirming the “buy” rating. Risks suggest that the macroeconomic environment may decline beyond expectations; the duration of the epidemic; the short-term convertible debt-for-share price announced by Beibu Gulf Port has not been determined; and the company's revenue per ton of goods may fluctuate in the short term.