Incident: Tangshan Port (601000.SH) released its 2023 annual report, with revenue of 5.845 billion yuan, up 4.00% year on year; net profit to mother of 1,925 billion yuan, up 13.93% year on year; balance ratio of 10.10%, narrowing by 1.89pct year on year.

Comment:

The steel industry and the north-south coal transportation industry chain are running smoothly, and throughput is increasing steadily. The company achieved cargo throughput of 230 million tons in 2023, an increase of 10.74% over the previous year. Among them:

Steel mills in the hinterland are highly motivated to produce, and the overall throughput related to the steel industry has increased. The company achieved the following throughput for products related to the steel industry in 2023:

Ore: Throughput of 107 million tons, up 11.37% year over year.

Coking coal: Throughput of 0.13 million tons, a year-on-year increase of 74.58%.

Coke: Throughput of 972,800 tons.

Steel: Throughput of 0.18 million tons, up 25.77% year over year. Among them, the foreign trade steel throughput was 111 million tons, a year-on-year increase of 129.91%, mainly benefiting from the construction of foreign trade routes.

The north-south coal transportation industry chain maintains steady operation: the company achieved a thermal coal throughput of 56 million tons in 2023, which is basically the same as the previous year.

The plan is to build berths to match demand, and we expect the associated cash pressure to be limited. The company announced that it plans to build bulk cargo berths No. 51 and No. 52 in the Jingtang Port area to match the implementation of the national “public transit railway”, Tangshan steel production capacity transfer strategy to coastal areas, and the need to improve environmental quality and adjust functions in the Jingtang Port area.

The company plans to use no more than $1.35 billion in self-raised capital. The total planned investment is no more than 5.4 billion yuan. 25% of the funding sources are self-financing and 75% bank loans.

The company has plenty of cash. By the end of 2023, the company's monetary capital reached 5.615 billion yuan. Considering the 30-month project period, we expect the cash pressure associated with the berth construction plan to be limited.

The dividend ratio was 61.57%, in line with expectations. The company paid a dividend of 2 yuan for every 10 shares in 2023, accounting for 61.57% of net profit attributable to mother. Corresponding to the closing price on March 28, 2024, the dividend rate was 4.6%, maintaining a high dividend capacity, which is in line with expectations.

Profit forecast and investment rating: Tangshan Port's performance is growing steadily. The company is expected to achieve operating income of 60.40, 62.34, and 6.369 billion yuan from 2024 to 2026, up 3.34%, 3.23%, 2.16% year on year, and achieve net profit of 20.17, 21.09, and 2.02 billion yuan, up 4.77%, 4.41% year on year. The corresponding EPS is 0.34, 0.36, 0.37 yuan. The closing price of March 28, 2024 corresponds to PE of 12.84. 12.32, 11.85 times, maintaining the “gain” rating.

Risk factors: The throughput of goods related to the steel industry falls short of expectations; the throughput of goods related to the transportation of coal from North China to the South falls short of expectations; and the pressure on cash expenses exceeds expectations.