Qingdao Port released its 2024 semi-annual report on August 29, 2024:

In the first half of 2024, the company achieved operating income of 9.067 billion yuan, down 0.98% year on year; realized net profit of 2.642 billion yuan, up 3.05% year on year; net cash flow from operating activities was 1.717 billion yuan, down 43.53% year on year; basic earnings per share was 0.41 yuan, up 5.13% year on year; and weighted average return on net assets was 6.50%, a decrease of 0.13 percentage points year on year.

In Q2 2024, the company achieved operating income of 4.637 billion yuan, up 0.68% year on year and 4.68% month on month; realized net profit of 1.325 billion yuan, up 1.56% year on year, up 0.62% month on month; net cash flow from operating activities was 1.156 billion yuan, down 42.70% year on year and up 105.97% month on month.

Containers: Achieve both throughput and segment performance growth. 1) In the first half of 2024, the company, its joint ventures and joint ventures (excluding the equity ratio of related joint ventures and joint ventures held by the company) achieved a container throughput of 15.82 millionTEU, an increase of 9.0% year on year; 8 new container routes were added, and 6 sea-rail intermodal trains were opened; the sea-rail intermodal transport volume reached 1.31 millionTEU, an increase of 13.4% year on year.

On a quarterly basis, Q1 2024 and Q2 2024 achieved container throughput of 7.67 and 8.15 millionteU, respectively, with year-on-year increases of 11.5% and 6.7%, respectively. 2) In the first half of 2024, the company's container handling and supporting services achieved segment performance of 1.083 billion yuan, an increase of 23.1% over the previous year, mainly due to the increase in container business volume to achieve revenue growth and efficiency; among them, the holding company achieved profit of 0.539 billion yuan, an increase of 34.4% year on year; investment income in joint ventures and associated companies was 0.544 billion yuan, an increase of 13.6% year on year.

Liquid bulk goods, dry bulk goods: Segment performance is under pressure. 1) In the first half of 2024, the company's liquid bulk handling and supporting services achieved segment performance of 1.243 billion yuan, a year-on-year decrease of 3.7%, mainly affected by the commissioning of new crude oil terminals in surrounding ports and the decline in the operating rate of refineries. Among them, the holding company achieved profit of 1.136 billion yuan, a year-on-year decrease of 1.3%; the return on investment in joint ventures was 0.107 billion yuan, a year-on-year decrease of 23.4%. 2) In the first half of 2024, the company achieved segmental performance of 0.297 billion yuan for metal ore, coal and other goods processing and supporting services, mainly due to an increase in the share of low-rate business volume; among them, the holding company's profit was 0.282 billion yuan, a year-on-year decrease of 10.5%; the return on investment in joint ventures was 0.015 billion yuan, up 5.6% year on year.

Shandong port integration continues to advance, and the company's overall competitiveness is expected to increase. According to the “Qingdao Port International Co., Ltd. Report on Issuing Shares and Paying Cash to Purchase Assets and Raising Supporting Funds and Related Transactions (Draft)” issued by the company, the company plans to issue shares to Rizhao Port Group and Yantai Port Group and pay cash to purchase 100% of the oil company's shares, 50.00% of Rizhao Shihua's shares, and 51.00% of Gangyuan Pipeline's shares; the total consideration for the underlying assets is 9.44 billion yuan, including 4.81 billion yuan for shares and 4.63 billion yuan for cash . According to the announcement, in order to better improve the asset quality of listed companies and the level of earnings per share, the transaction removed the target assets of dry bulk grocery ports with poor profitability and supporting business, and added the target assets related to liquid bulk port handling and supporting business where profits and construction progress improved rapidly since the previous plan announcement. According to the “Examination Preparation and Review Report” issued by Shinaga Zhonghe, the impact of raising supporting capital was not taken into account, and the calculation was based on Q1 data for 2023 and 2024. After the transaction was completed, the asset size, revenue scale, and profit scale of listed companies all increased compared to before this transaction, and earnings per share also increased, which is conducive to consolidating the position of listed companies in the industry and enhancing their core competitiveness. This transaction has not yet been completed, so it is recommended to keep an eye on subsequent developments.

Profit forecast, valuation and investment rating: Without considering the impact of the company's proposed assets to be acquired, the company is expected to achieve net profit of 5.419, 6.014, and 6.593 billion yuan respectively in 2024-2026, with earnings per share of 0.83, 0.93, and 1.02 yuan respectively. The current stock price is 9.31 yuan. The corresponding PE is 11.2X/10.0X/9.2X, respectively, maintaining a “buy” rating.

Risk warning: macroeconomic downturn risk, hinterland economic fluctuation risk, industry rate adjustment risk, port integration falling short of expectations, risk of model assumptions and calculation errors, risk of untimely information data updates.