The current situation of the company
The container throughput of Ningbo Port has increased since June this year, accelerated in the fourth quarter, and exceeded the whole of 2020 by December 15. Since the beginning of this year, the company has introduced Shanghai Port as a strategic investor and acquired the competitive assets of Ningbo Zhoushan Port Group. We believe that the acceleration of regional integration in the Yangtze River Delta will help to enhance the company's long-term value.
Comment
Throughput and business performance improved simultaneously, thanks to good domestic epidemic control and the advantages of a complete industrial chain, China's foreign trade exports grew against the trend. Ningbo Port, which ranks first in cargo throughput and second in container throughput, directly benefited from it: the company's cargo throughput and container throughput became positive from April and June, achieving a year-on-year growth of 4.6% and 3.5% respectively in the first 11 months. In the third quarter, the company's cargo throughput and container throughput increased by 12.0% and 10.3% respectively compared with the same period last year. The decline in superimposed management and financial expenses led to a 24% year-on-year increase in deduction non-net profit (up from-25% in the 1.2 quarter).
The acquisition of inter-industry competitive assets will help the company to fully co-ordinate and make full use of the province's coastal port resources to participate in the market competition. the announcement of the acquisition of equity and related party transactions was disclosed on the evening of November 27th, and planned to purchase the shares of the relevant competitive assets with a transaction consideration of 5.642 billion yuan in cash, including the 100% equity interests of "Jiaxing Port Holdings", "Jiaxing Port", "Jiaxing Port" and "forked Bird Port" held by the Provincial Seaport Group. And Toumen Port Investment holds 100% stake in "Toumen Port Port".
The book net assets of the five underlying assets are 4.918 billion yuan, and the value-added rate is 14.72%. After the acquisition, a new port development pattern with Ningbo Zhoushan Port as the main body, Wenzhou Port and Taizhou Port along the southeast coast and Jiaxing Port around Hangzhou Bay in northern Zhejiang as the two wings will be formed to jointly develop Yiwu Land Port. We believe that this acquisition will help the company to optimize route layout and logistics network as a whole, avoid homogeneous business competition, improve the construction of stirring system, and vigorously develop the potential of stock business. Enhance the market scale in the province and the core competitiveness of the main ports, and maintain the steady improvement of cargo throughput.
The introduction of Shanghai Port as a strategic investor has further accelerated the regional integration of the Yangtze River Delta. In August, the company completed a directional additional issue of 9.67 billion yuan to Ningbo Zhoushan Port Group and Shanghai Port Group. After the additional offering, Shanghai Hong Kong Group held a 5% stake in the company, became a strategic investor and nominated a non-independent director. The two sides will carry out strategic cooperation in the areas of comprehensive port development, construction, operation and management on the principle of mutual benefit, such as joint participation in the development of Xiaoyangshan Port area. We believe that Shanghai Port and Ningbo Port are geographically adjacent, and there are both competition and cooperation. This time, through the ties at the capital level, it will help the two sides to integrate their respective assets and give full play to their comparative advantages, so as to achieve the long-term and healthy development of the entire Yangtze River Delta port group.
Valuation proposal
Considering that the container throughput of the company is faster than expected and the company has taken cost reduction measures, we have raised our 2020 / 2021 net profit forecast by 7% to 33.0% to 33.0 / 3.66 billion yuan. "the acquisition has not been completed and does not include this part of the assets). The current share price corresponds to a price-to-earnings ratio of 17.7x / 16.0x 2020max, maintaining a neutral rating and a target price of 4.40RMB, corresponding to a price-to-earnings ratio of 21.0x / 19.1x 2020x2021. There is 18.9% upside compared to the current stock price.
Risk.
The growth rate of throughput was lower than expected, but the rate of loading declined.