Incidents:
On April 13, Beibu Gulf Port released its 2020 annual report: (1) Financial data: In 2020, the company achieved operating income of 5.363 billion yuan, an increase of 11.9% over the previous year; net profit of Guimu was 1,076 million yuan, an increase of 9.29% over the previous year, after deducting net profit of non-Gumi's net profit of 1,061 million yuan, an increase of 9.51% over the previous year. The weighted ROE in 2020 was 10.90%, up 0.57 percentage points from 2019. (2) Business data: After divesting the assets of the inland waterway terminal and adjusting the caliber, the company completed cargo throughput of 238 million tons, an increase of 16.21% over the previous year, and a container throughput of 5.05 million TEUs, an increase of 32.23% over the previous year.
Commentary:
1. The main port business performed brilliantly, and the container growth rate ranked first among coastal ports in the country.
Benefiting from the synergistic effect of port resource integration, the economic growth of the Greater Southwest region, and increasingly close trade exchanges between China and ASEAN, combined with the promotion of new land and sea corridors in the west, the company's main port business bucked the trend in 2020 under the test of the epidemic. The cargo throughput was 238 million tons, an increase of 16.21% over the previous year, ranking second among coastal ports in the country.
① Containers: The container throughput in 2020 was 5.05 million TEUs, ranking among the top ten container throughput of coastal ports in the country, with a year-on-year increase of 32.23%, ranking first among coastal ports in the country. The company continued to develop supplies in the hinterland and promote diversification business. Among them, 185,000 TEUs of metal ore were distributed, up 48% year on year; 147,000 TEUs of corn, up 33% year on year; Shenglong Metallurgical and Beibu Bay New Materials completed a total of 631,000 TEUs, an increase of more than 40%. The company has accelerated key sea-rail intermodal container projects, expanded container transit business, and exploited the container agglomeration effect. Sea-rail intermodal transportation completed 2.82 million TEUs in 2020, an increase of 75% over the previous year. The transfer of water to water was 748,000 TEUs, an increase of 241% over the previous year. Among them, foreign trade completed 15,000 TEUs, an increase of 400% over the previous year.
② Bulk goods: The bulk goods throughput of Beibu Gulf Port increased 12% year-on-year in 2020. Among them, traditional supplies such as iron ore and coal increased markedly. Metal ore increased 7% year-on-year. The throughput of copper concentrate surpassed Nanjing Port and Qingdao Port for the first time, becoming the country's first port of import; the throughput of manganese ore and chrome ore stabilized second in the country. Sulphur imports ranked first in the country, accounting for 40% of sulfur imports from coastal ports in the country; new sources of foreign trade food and imported bauxite increased by 850% and 1263% respectively, achieving rapid growth.
In January-January 2021, the total cargo throughput of Beibu Gulf Port (Hong Kong) reached 61,915,600 tons, an increase of 16.06% over the previous year. Among them, the container portion completed 1,2639 million TEUs, an increase of 36.81% over the previous year. The growth rate of cargo throughput and container throughput remained strong.
2. Revenue and net profit both reached new highs, and business performance improved steadily.
① The company's revenue and net profit have been rising year by year in the past five years. The compound annual revenue growth rate in 2016-2020 reached 15.68%, and the compound annual growth rate of Guimu's net profit reached 24.20%. Revenue in 2020 was 5.363 billion yuan, an increase of 11.9% over the previous year; Guimu's net profit was 1,076 million yuan, an increase of 9.29% over the previous year, after deducting net profit of non-return mother's net profit of 1,061 million yuan, an increase of 9.51% over the previous year.
Cost side: The company's operating costs were 3.304 billion yuan, an increase of 12.76% over the previous year. This is mainly due to the increase in fixed asset depreciation, etc. formed by the company's subsidiaries in purchasing port equipment and warehouse rehabilitation, which resulted in a 6.15% year-on-year increase; as well as the increase in the number of employees and the increase in piece-rate wages, the total labor cost increased 20.16% year-on-year.
Expense side: In 2020, the company's three fees totaled 672 million yuan, an increase of 16.44% over the previous year. Among them, management expenses were 441 million yuan, an increase of 16.58% over the previous year, mainly due to increased efficiency wages, incentive costs for confirming restricted stocks according to schedule, and increased amortization of intangible assets. Financial expenses were $231 million, an increase of 16.19% over the previous year, mainly due to bill discounting, an increase in the size of average interest-bearing debt, a year-on-year increase in interest expenses, and a year-on-year decrease in interest income.
Non-operating expenses: Due to scrapped fixed assets and increased external donations, non-operating expenses were 63.8483 million yuan for the whole year, an increase of 3667.53% over the previous year.
The sharp increase in non-operating expenses put pressure on the company's net profit in 2020, but the impact of scrapped fixed assets and external donations was not sustainable. The short-term impact did not change the long-term investment logic. We are still optimistic that the company's future operating performance will be further released as port business volume increases.
② The total revenue of the company's handling and storage, tugboat and port management, and other businesses in 2020 was 48.28, 434 and 101 million yuan, with year-on-year growth rates of 12.92%, -0.62% and 25.33%.
Benefiting from the continued rapid growth in cargo and container throughput at Beibu Gulf Port, the scale of the company's port handling and storage business was further expanded, accounting for 90.03% of revenue. At the same time, the scale effect was further highlighted. The gross profit margin of the loading and unloading storage business was 42.16%, up 0.44 percentage points from 2019. The weighted ROE in 2020 was 10.90%, up 0.57 percentage points from 2019, and the quality of earnings was steady, moderate and positive. With the divestment of the relatively unprofitable inland waterway terminal business, the company's future operating efficiency is expected to improve further.
3. Development within and outside the region drives business growth, and there is room for port growth during the growth period.
① Within the region: The southwest region is developing strongly, and the main port industry has sufficient growth momentum. The southwest region continues to undertake large-scale industrial transfers from developed regions and is developing rapidly. In 2015-2020, the compound annual GDP growth rate of the five provinces of Yungui, Sichuan, Chongqing, and Gui reached 9.76%. Construction of key industrial projects in the Greater Southwest region is advancing, and strong domestic demand for commodities such as coal and iron ore has brought direct growth to the dry bulk business in Beibu Gulf Port.
② Outside the region: Cooperation with ASEAN continues to be strengthened to help the growth of foreign trade processing business. In 2020, ASEAN became China's largest trading partner for the first time. The total import and export trade between the two sides was 4.74 trillion yuan, an increase of 7.02% over the previous year, accounting for 14.73% of China's total foreign trade value. Guangxi's total import and export trade with ASEAN has continued to increase year by year in the past five years, accounting for around 50% of Guangxi's total import and export trade. Of the 28 foreign trade container routes at Beibu Gulf Port in Guangxi, 19 are routes to ASEAN countries. Basically, full coverage of ASEAN countries has been achieved. Trade cooperation with ASEAN continues to be strengthened, driving the continuous growth of foreign trade cargo throughput at Beibu Gulf Port.
Investment advice:
The company is still in a period of growth. Relying on its geographical advantage of being backed by the hinterland of the Great Southwest and facing ASEAN countries, Beibu Gulf Port plays an important role as a logistics node for the new land and sea channels in the west. The growth rate of cargo and container throughput is expected to continue to grow rapidly in the future, and container throughput is expected to reach 10 million TEUs by 2025. We expect the company's revenue for 2021-2023 to be 60.25, 67.43, and 7.503 billion yuan respectively, while the net profit of the parent is 1,225, 15.05 and 1,774 billion yuan respectively, and the corresponding EPS is 0.77, 0.92, and 1.09 yuan respectively. According to the company's closing price of 10.16 yuan/share on April 12, 2021, the corresponding company's PE for 2021-23 is 13.13/11.03/9.36 times, respectively. Maintain a “Recommended” rating.
Risk warning:
Economic downturn risks in southwest China and Guangxi; risk of rising trade protectionism in Southeast Asia; increased risk of regional port competition.