The position of Tianjin Port as a hub port continues to improve. The growth rate of production, operation and net profit in 2020 is improving, and Tianjin Port announced its 2020 annual report: 1) Revenue increased 4.2% year-on-year to 13.43 billion yuan; 2) Return net profit increased 14.0% year-on-year to 687 million yuan, slightly higher than our expectations of 657 million yuan; 3) Net profit after deducting non-return mother increased 15.9% year-on-year to 689 million yuan. The improvement in performance was mainly due to the optimization of the company's business structure and benefiting from economic cooperation strategies in the Bohai Rim and the Beijing-Tianjin-Wai region. In 2020, the company's bulk cargo and container throughput increased 2.7% and 6.3% year over year. We maintained the 2021/2022 net profit forecast and added a 2023 forecast (EPS: 0.31/0.34/0.35 yuan); based on the 17.1x 2021x 2021 EPE valuation, we gave a target price of 5.30 yuan to maintain the “increase in holdings” rating.

The port handling business is improving. Among them, the growth rate of container throughput exceeds the industry average. In 2020, the port handling business of Tianjin Port achieved revenue of 6.34 billion yuan, an increase of 3.1% over the previous year; gross profit of 2.12 billion yuan, an increase of 6.2% over the previous year; and the gross profit margin was 33.4%, an increase of 1.0 percentage point over the same period last year. Among them, the company's bulk cargo and container throughput was 230 million tons and 18.35 million TEUs respectively, up 2.7% and 6.3% year-on-year, and the growth rate of container throughput exceeded the industry average (container throughput in national ports increased 1.2% year-on-year during the same period). The increase in the company's gross margin level has mainly benefited from the company's active supply restructuring and effective successful control.

The gross profit of the port logistics business increased dramatically, and port services and other businesses achieved high gross margins. In 2020, the port logistics business of Tianjin Port achieved revenue of 1.46 billion yuan, an increase of 14.4% over the previous year; gross profit of 360 million yuan, an increase of 119.5% over the previous year; and the gross profit margin was 24.8%, an increase of 11.9 percentage points over the same period last year. The company's port services and other business segments achieved operating revenue of 570 million yuan, down 9.0% from the previous year; gross profit of 3.4 billion yuan, down 7.2% from the previous year; and the gross profit margin was 59.4%, up 1.1 percentage points from the same period last year. In 2020, the gross profit of the company's port logistics business increased dramatically year-on-year, and the port service business achieved a high gross margin level, mainly because the company, as the operator of the handling logistics industry in the port area of Tianjin, actively expanded value-added logistics services related to the port industry chain to provide customers with integrated integrated port services.

Maintaining the 2021/2022 net profit forecast, maintaining the “increase in holdings” rating, we maintained the company's 2021/2022 net profit forecast, and added a 2023 forecast (net profit of the mother: 740 million/800 million/850 million yuan). We gave a target price of 5.30 yuan (previous target price of 5.35 yuan, based on 19.8x 2020 EPS) based on the 17.1x 2021x 2021E PE valuation (average PE value of 20.2x minus 1 standard deviation in the company's three-year history, the valuation was discounted from the historical level mainly due to the slowdown in net profit growth in 2021, 2021E EPS of 0.31 yuan).

Risk warning: 1) Port throughput growth is lower than expected; 2) port logistics and other business growth is lower than expected; 3) natural disasters; 4) policy risks.