Main points of investment:
The rebound in throughput led to profit growth, maintaining the target price of 3.8 yuan and maintaining a "neutral" rating. The economic recovery led to a pick-up in the throughput growth rate of Ningbo Port, which hedged the impact of the port fee reduction, and the main business profits increased rapidly. Maintain the forecast EPS of 0.19,0.21,0.22 yuan in 2020-22. According to DCF valuation method and comparable company PB, the target price is maintained at 3.80 yuan.
Foreign trade recovers and port throughput picks up. After the outbreak of the epidemic, China took the lead in resuming production and work, and commodity imports and container cargo exports increased rapidly, driving the rapid growth of cargo throughput and container throughput of Ningbo Port. Cargo throughput increased by 12.7% in September container throughput increased by 16.9% in October, close to the high growth rate of the past five years. As the inventory cycle between China and the United States rises, throughput is expected to maintain rapid growth in the first half of 2021.
The profits of the main business are growing rapidly and ROE is stable. The increase in throughput led to the improvement of terminal capacity utilization, the profit margin reached a new high in nearly five years, and the return net profit increased by 24% in the third quarter compared with the same period last year. However, due to the impact of equity expansion, the main business ROE in the first three quarters was basically the same as that in the previous two years.
PB valuations gradually match ROE. The profit growth of the port depends on the capacity expansion brought about by capital expenditure, the stock terminal is limited by the bottleneck of capacity utilization, and the rising cost rigidity puts downward pressure on ROE. Therefore, the port cannot be valued by PE according to earnings growth, but is more suitable to be valued by PB based on ROE. At present, PB and ROE basically match.
Risk analysis. Investment in low-return businesses, over-investment in the port industry, intensified competition in surrounding ports, re-emergence of port fee reduction policies, decline in real estate and infrastructure investment, and slowdown in foreign trade growth.