Main points of investment:
Increase the dividend ratio to boost the rate of return of shareholders, maintain the target price of 3.58 yuan, and maintain the "overweight" rating. In 2020, the compression of trade and transportation business in Tangshan Port led to a 30% drop in operating income and a 4% increase in net profit, slightly lower than expected. The carbon neutralization policy limits the future throughput growth space, reducing the forecast EPS for 2021-22 to 0.31,0.33 yuan (the original forecast is 0.35,0.37 yuan), and increasing the forecast EPS for 2023 to 0.34 yuan. According to the DCF valuation method and the average PB of comparable companies, the target price is maintained at 3.58 yuan.
The proportion of dividends increases, and the rate of return on shareholders' investment increases. The cash flow of Tangshan Port is stable and abundant, the reinvestment demand of the main business of the port in the future is small, and the scale of trade and transportation business has been reduced due to the low rate of return on investment, so a large amount of cash can be used for dividends. The proportion of dividends increased to 64% in 2020, much higher than the level of about 30% in the past five years. The rate of return of shareholders' dividends reinvested in Tangshan Port is much higher than that of deposits, bank financial management and other investment returns in Tangshan Port.
The main port industry is expected to obtain sustained and stable cash flow. In 2020, ore, coal and steel accounted for 44%, 30% and 5% of the cargo throughput of Tangshan Port, respectively. Although the production limit of Tangshan Steel Plant suppresses short-term throughput and carbon neutralization suppresses long-term throughput, the stable demand for steel and coal in China will keep the throughput stable, thus bringing stable profits and cash flow.
Reduce trade and transportation business and improve profitability. Trade business is highly leveraged, profitability and cash flow fluctuate greatly, and the average rate of return on investment is low. Reducing scale helps to improve asset quality and profitability. The transportation business has lost money year after year, and the loss will be reduced after the basic withdrawal.
Risk analysis. Excessive investment in the port industry, intensified competition in the surrounding ports, the recurrence of port fee reduction policies, and production restrictions in steel mills led to a decline in throughput.
