Incident: Tangshan Port (601000.SH) released its 2024 semi-annual report.

Cargo throughput: 0.119 billion tons in the first half of 2024, up 1.84% year on year; 0.06 and 0.059 billion tons in the first quarter and second quarter of 2024 respectively, with year-on-year growth rates of 2.11% and 1.57% respectively.

Revenue: Achieved 2.978 billion yuan in the first half of 2024, up 1.81% year on year; 1.484 and 1.494 billion yuan respectively in the first quarter and second quarter of 2024, with year-on-year growth rates of 1.77% and 1.86% respectively.

Net profit to mother: 1.104 billion yuan in the first half of 2024, up 7.24% year on year; 0.541 and 0.562 billion yuan were achieved in the first quarter and second quarter of 2024 respectively, with year-on-year growth rates of 4.81% and 9.68% respectively.

Balance to debt ratio: 9.63% at the end of 2024, a year-on-year narrowing by 0.96 percentage points.

Comment:

Steel industry: The popularity of steel exports has led to a high increase in related throughput. In the first half of 2024, the country's steel exports reached 0.053 billion tons, a year-on-year increase of 24.0%.

The company's ore throughput: 0.066 billion tons in the first half of 2024, up 11.37% year on year; 0.034 and 0.032 billion tons in the first quarter and second quarter of 2024 respectively, with year-on-year growth rates of 25.56% and 26.53% respectively.

The company's steel throughput: 0.01 billion tons in the first half of 2024, up 11.37% year on year; 0.005 and 0.004 billion tons in the first quarter and second quarter of 2024 respectively, with year-on-year growth rates of 19.05% and -5.64% respectively.

Transportation of coal from north to south: The reduction in coal production in the west is under pressure. Focus on the performance of the peak electricity consumption season in the second half of the year. In the first half of 2024, total raw coal production in Shanxi, Shaanxi, and Inner Mongolia reached 1.597 billion tons, a year-on-year decline of 3.66%, putting pressure on the throughput associated with the transportation of coal from North to South at the Bohai Rim port. The company's coal throughput reached 0.027 billion tons in the first half of 2024, a year-on-year decrease of 25.49%; the first and second quarters of 2024 achieved 0.013 and 0.014 billion tons respectively, with year-on-year growth rates of -25.22% and -25.74% respectively.

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. On July 18, 2024, the company announced that the relevant berths were approved by the Hebei Provincial Development and Reform Commission.

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

The company has plenty of cash. By the end of the first half of 2024, the company's monetary capital reached $4.205 billion. Considering that the construction period of the project is 30 months, we expect the cash pressure associated with the berth construction plan to be limited.

Profit forecast and investment rating: Tangshan Port's performance is growing steadily. The company is expected to achieve operating income of 5.971, 6.222, and 6.387 billion yuan from 2024 to 2026, up 2.16%, 4.20%, and 2.65% year on year, and achieve net profit of 2.02, 2.105, and 2.205 billion yuan, up 4.92%, 4.23%, and 4.77% year on year. The corresponding EPS is 0.34, 0.36, 0.37 yuan. The closing price of August 29, 2024 corresponds to PE 14.20, 13.62, 13.00 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.