Tangshan Port is a large port enterprise group that dominates the planning, construction and operation of Jingtang Port area in Tangshan Port area, which is located in the core area around the Bohai Sea. Jingtang Port area has a planned area of 90 square kilometers, including 65 square kilometers on land and 25 square kilometers in sea area. at present, 44 15,000-ton berths have been built using the natural coastline of 11.2 kilometers, 12.21 kilometers of wharf shoreline and 200,000 tons of waterways. The company's operating income mainly comes from commodity handling and storage, port management and commodity trading (sales). In 2022, it accounted for 77%, 5%, 15%, respectively, of operating income. From the perspective of gross profit, the proportion is 88%, 5%, 2%, respectively. Loading and unloading and storage is the core of the company's business.

The situation that China's ports are large but not strong is expected to improve with the promotion of integration. China is the country with the largest port throughput in the world, with five largest port groups, and China accounts for 16 of the 20 ports with the largest throughput in the world.

From the perspective of demand, China's port throughput has increased year after year, which is equivalent to the growth rate of GDP, but because the port capacity growth obviously lags behind the demand cycle due to the decision-making cycle and construction cycle, China's port industry has encountered the plight of mismatch between supply and demand since 2010. in addition, the convergent services and overlapping hinterland have led to the deterioration of the competition pattern in the region, and the overall ROE and net interest rate of the industry is weak. In order to solve the problem of internal friction, the integration of ports in China has accelerated obviously since 2015, and now it has basically formed a pattern of "one province, one port". The premium rate has also shifted from the guiding price to the market-oriented pricing, and the overall net interest rate of the industry has obviously rebounded.

In recent years, Tangshan Port shares have spun off some of the non-core main businesses with weak profits, and the quality of operation has been significantly improved.

Since 2020, Tangshan Port shares have spun off the shipping and container terminal businesses that are difficult to achieve profits, and greatly reduced the commodity sales business with low gross profits. although the revenue has been greatly reduced, the profit end has not been significantly damaged. The cash flow has improved significantly. In 2022, the company achieved operating income of 5.62 billion yuan and return to its mother net profit of 1.69 billion yuan, almost halving its revenue compared with 2019 before the divestiture. The profit side only fell by about 5%, and the operating net cash flow increased from 1.59 billion to 2.41 billion. In the future, the company will focus more on the core loading and unloading business. Considering that Tianjin in the Bohai Bay port group has reduced the loading and unloading scale of commodities due to environmental protection policy, the ports in Hebei Province have been integrated in 2022H2 and Qinhuangdao has implemented strategic transformation, and the company's loading and unloading and storage business is expected to rise in line with volume and price.

The dividend rate has increased significantly, and the increase in value is expected. Synchronized with the company's divestiture of non-core businesses, the company's dividend rate increased significantly. Although the company's deducted non-net profit decreased slightly due to the epidemic in 2020-2022, the dividend amount remained stable at 1.185 billion yuan, with a dividend rate of about 55% and 70% (accounting for 66% of the deducted non-profit ratio of 66% to 74%), significantly higher than the level of about 25-30% in 2019 and before. Considering that the company has no capital expenditure plan for the time being, and its profitability is expected to improve significantly from 2023, the dividend scale of the company is expected to rise again, bringing about an improvement in the molecular side of the DDM model, and the value of the company is expected to increase.

Profit forecast and valuation: unlike other port listed companies, which actively develop sidelines and develop towards investment platforms, Tangshan Port shares focus on the main business and continue to divest less profitable businesses and increase the dividend rate since 2020. The quality of operation has been significantly improved. Benefiting from the integration of Hebei ports and the strategic transformation of other ports in Bohai Bay at the end of 2023, it is expected that the competition pattern of commodity loading and unloading business in Bohai Bay port will be improved, the loading and unloading volume of coal and iron ore will tilt to Tangshan area, and the loading and unloading rate is expected to rebound obviously, which will lead to the growth of the company's net profit. It is estimated that the company will achieve a net profit of 2.04 billion yuan in 2025. The reasonable valuation range of the company is between 4.16 and 4.42 yuan per share, which is 11.8% higher than the closing price on August 17, and the "overweight" rating is given for the first time.

Risk hints: the impact of port integration is lower than expected, iron and steel environmental protection policies are stricter than expected, corporate dividend rates decline more than expected, port rates are less market-oriented, infrastructure and real estate investment is lower than expected, and so on.