Overview of events

The company released the third quarter report of 2020, the company achieved revenue of 4.361 billion yuan in the first three quarters, + 13.36% year-on-year, net profit of 598 million yuan, + 11.77%, and net profit of 590 million yuan, + 26.86%, and basic earnings per share of 0.19 yuan.

In the single quarter of Q3 in 2020, the company achieved revenue of 1.522 billion yuan, year-on-year + 15.01%, net profit of 203 million yuan, + 21.69%, and non-return net profit of 201 million yuan, + 49.83%, and basic earnings per share of 0.07 yuan.

Q3 cargo throughput maintained steady growth, the performance of different types of goods differentiated, the throughput of metal ore increased greatly, and the throughput of coal and products and wood decreased compared with the same period last year.

With the recovery of the global economy and the general recovery of the port industry, the cargo throughput of Rizhao Port continued its growth trend in the third quarter. In the single quarter of Q3 in 2020, the company completed cargo throughput of 69.99 million tons, + 9.6% year-on-year, 1.2 percentage points higher than the growth rate of + 8.4% of Q2; in the first three quarters of 2020, the company completed cargo throughput of 203 million tons, + 7.5% year-on-year.

According to the type of trade, the growth rate of foreign trade goods throughput of Q3 is faster than that of domestic trade: in the single quarter of 2020, the throughput of foreign trade and domestic trade goods of the company was 56.29 million tons and 13.77 million tons respectively, compared with the same period last year. The throughput of foreign trade and domestic trade goods of the company in the first three quarters of 2020 was 16.1 million tons, respectively, compared with the same period last year.

According to the type of goods:

The throughput of metal ores, non-metallic ores and grain increased year-on-year: benefiting from the demand for re-production and replenishment of inventory, the throughput of metal ores and non-metallic ores in Q3 Rizhao Port increased significantly compared with the same period last year. The throughput of metal ores and non-metallic ores in Rizhao Port in the single quarter of 2020 was 42.86 million tons, respectively, compared with the same period last year. The throughput of metal ore and non-metal ore completed in the first three quarters was 1.2 billion tons respectively, which was 28.4% compared with the same period last year. With the gradual recovery and release of China's aquaculture capacity and the increased demand for soybeans and other grains, the grain throughput of Rizhao Port in the single quarter of Q3 in 2020 was 4.14 million tons, + 26.6 percent compared with the same period last year, and 10.47 million tons in the first three quarters, + 14.5 percent year-on-year.

The throughput of coal and products, wood and steel decreased compared with the same period last year: affected by the epidemic and import policies, the throughput of coal and products, wood and steel of Rizhao Port decreased in the third quarter compared with the same period last year. The throughput of coal and products, wood and steel of the company in the single quarter of 2020 was 1150,000,000 tons, respectively, compared with the same period last year, which was-5.6%, 14.4% and 62.6%, respectively. The throughput in the first three quarters was 36.82, 1488, respectively, 2.17 million tons, compared with the same period last year, which was + 4.6%, 14.1%, 48%, respectively.

The company's revenue and performance increased steadily with throughput in the first three quarters, and the profit base in the same period last year was relatively low. The company's net profit in the first three quarters and net profit deducted from non-return in the first three quarters were + 11.77% and 26.86% respectively compared with the same period last year.

In the first three quarters of 2020, the company achieved revenue of 4.361 billion yuan, + 13.36% compared with the same period last year, mainly driven by the year-on-year growth in cargo throughput and the positive impact of the adjustment of the railway transport business model in the port from collection and payment to revenue and expenditure.

During the reporting period, the company achieved a gross profit of 1.266 billion yuan, a year-on-year + 22.6%, and a gross profit margin of 29%, an increase of 2.2% over the same period last year. It is judged that the main reason is that the company adjusted its branch management model and adjusted part of its original cost to the accounting of management expenses, which also led to an increase in company management expenses during the reporting period.

In the first three quarters of 2020, the company's return net profit and non-return net profit were + 11.7% and 26.86% respectively compared with the same period last year. We judge that the main reasons for the higher profit growth are as follows: 1) the steady growth in throughput promotes the company's revenue and performance growth. 2) in the same period last year, due to factors such as hurricanes in Australia, the growth rate of the company's metal ore throughput was limited, while the current cost increased, resulting in a low profit base in the same period last year.

Investment advice: maintain the company's profit forecast, the company as the main ore, coal and other bulk cargo hub port in the north, throughput and performance growth is stable, the current PB is only 0.69 times, lower than the industry average valuation, we reiterate the company's "buy" rating.

We maintain the profit forecast of the company for 2020-22 with a net profit of $690 million, corresponding to an EPS of $0.23, and a PE of 12.1, 11.5, 10.8 times for 2020-22, respectively, according to the closing price of 2.72 yuan per share on October 30.

Risk hint

There is a possibility that the macroeconomic downturn may exceed expectations; the duration of the epidemic; resumption of work.