Brief performance review

On August 29, 2024, Tangshan Port released the 2024 semi-annual report. 1H2024's revenue was 2.978 billion yuan, up 1.8% year on year; net profit to mother was 1.103 billion yuan, up 7.2% year over year. Among them, Q2 achieved operating income of 1.494 billion yuan, an increase of 1.9% year on year, and realized net profit of 0.562 billion yuan to mother, an increase of 9.68% year on year.

Management analysis

Port throughput increased year-on-year, and the company's revenue increased year-on-year. 1H2024's revenue increased 2% year over year, mainly due to increased cargo throughput. The company's cargo throughput in the first half of the year was 0.119 billion tons, up 1.8% year on year. In terms of main commodities: 1) 66.23 million tons of ore were completed, an increase of 26% over the previous year. Demand for mainly steel was strong, and demand for imported iron ore continued to grow.

2) Coal completed 27.258 million tons, a year-on-year decrease of 25.5%, mainly due to weak demand for coal. 3) Steel reached 9.727 million tons, up 6.7% year on year. Among them, foreign trade steel completed 10.781 million tons, up 129.9% year on year, mainly due to strong steel exports.

Gross margin improved year over year, and expense ratio decreased year over year. 1H2024's gross margin was 50.02%, up 6.31 pct year on year. The main reason was the reduction in operating costs of tugboat companies that were no longer included in the company's consolidated statements in May 2024, and the cancellation of trade costs by the coal trading branch in May 2023, which led to a 3.9% year-on-year reduction in the company's 1H2024 operating costs.

The company's expense ratio decreased by 5.33 pct year on year, of which the company's sales expense ratio was 0.02%, a year-on-year decrease of 3.90 pct; the management expense ratio was 7.82%, a year-on-year decrease of 1.26 pct, mainly because tugboat companies were no longer included in the scope of the company's consolidated statements in May 2024; the R&D expenses rate was 0.91%, a year-on-year decrease of 20.89 octs; and the financial expense ratio was -1.40%, a year-on-year decrease of 5.30 pcts. Due to the year-on-year improvement in the company's gross margin, the company's net profit margin was 37.06%, up 1.87% year on year.

The construction of berths continues to advance, with a design throughput of 25.6 million tons. In March 2024, the board of directors of the company deliberated and passed the “Proposal on Investing in the Construction of Bulk Cargo Berths No. 51 and No. 52 in the Jingtang Port Area of Tangshan Port”. The construction scale of the project is 2 0.3 million-ton bulk cargo berths and supporting facilities. The annual design approval capacity is 25.6 million tons, and it is intended to use 826 meters of port shoreline. The total investment is estimated to be no more than 5.4 billion yuan. The funding source is 25% of the company's own financing, and the rest is bank loans. The construction period of the project is 30 months. In July 2024, the company received approval from the Hebei Provincial Development and Reform Commission for the construction of a berth.

Profit Forecasts, Valuations, and Ratings

Maintain the company's 2024-2025 net profit forecast of 2.161 billion yuan, 2.324 billion yuan, and 2.605 billion yuan. Maintain a “buy” rating.

Risk warning

The risk of rising labor costs, the risk of port rate control, the risk of tightening environmental protection policies, and the risk of declining foreign trade volume.