Main points of investment
Maintain a "prudent overweight" rating with a target price of HK $17.70: the company's overall performance in 2020 is in line with expectations. It is expected that as the epidemic slows down, the profitability of the logistics park business will continue to improve (the integrated logistics port will maintain its scale. Xiba Terminal Phase II leasing agreement and three new projects bring port business growth momentum, logistics park transformation and upgrading continues), environmental protection business brings new growth points for the toll road division. One-time costs fell gross profit margin rebounded, Shenzhen Airlines profit recovery, performance is expected to return to stable growth. We estimate that the company's 2021 Universe operating income in 2022 will be HK $221 billion, an increase of 7% over the same period last year, and its net profit will be HK $4.1 billion, up 1% and 7% over the same period last year. We maintain a "prudent overweight" rating with a target price of HK $17.70, corresponding to a 2021 PE of 9.4 PE in 2022. The company maintains a strong dividend payout with a current dividend yield of 7.2 per cent.
Year-on-year net profit fell 20 per cent, and the performance was in line with expectations: in 2020, the company achieved operating income of HK $19.5 billion (the same below), up 16 per cent from the same period last year; gross profit of HK $6.5 billion, down 4 per cent from the same period last year; and net profit of HK $4 billion, down 20 per cent. The gross profit margin was 33.2%, down 6.6 percentage points from the same period last year, and the net return rate was 20.6%, down 9.2 percentage points from the same period last year. The decline in return net profit is mainly due to the decline in gross profit margin and the negative impact of the joint venture profit mainly by Shenzhen Airlines. With the gradual slowdown of the epidemic, the joint venture profit is expected to recover in 2021. For the whole year, the dividend per share was 96 cents, down 18% from the same period last year, and the total dividend paid for the whole year accounted for 53% of the mother's net profit, maintaining a strong dividend payout.
Environmental protection business has brought new sources of revenue growth: Shenzhen Expressway revenue in 2020 was HK $9.3 billion, up 30 per cent year-on-year. Among them, the income from environmental protection business increased significantly to 2.9 billion Hong Kong dollars, an increase of 332% over the same period last year. Nanjing Wind Power Company, Baotou Nanfeng Company and Lande Environmental Protection Company joined the Shenzhen Expressway, bringing new revenue growth points. Due to the significant increase in one-time deferred income tax assets and investment costs of environmental protection business, the division's return net profit has declined. The net profit of Shenzhen Expressway in 2020 was 900 million Hong Kong dollars, down 27% from the same period last year; excluding the impact of deferred income tax assets, the net profit increased by 16% compared with the same period last year.
The logistics business remains stable and generates revenue: the company's logistics revenue in 2020 was HK $7.9 billion, unchanged from the same period last year.
The net profit of homing was HK $1.2 billion, down 27% from the same period last year, mainly due to some indemnificatory apartment projects with low gross profit margin. In the income composition of the logistics business segment, the business income of the logistics park is HK $900 million, the port and related services is HK $1.4 billion, the logistics services business is HK $1 billion, and the transformation and upgrading of the logistics park is HK $4.7 billion, up 7%, down 10%, 8% and 3% respectively over the same period last year.
Maintain a good financial position: the company's net debt ratio was 29% at the end of 2020, up 4.3 percentage points from a year earlier. The total interest-bearing liabilities are HK $32 billion, with RMB debt accounting for 88%. The panda bonds, medium-term bills and corporate bonds issued by the company are subject to concentrated maturity, so the short-term liabilities grow rapidly. as of the end of the year, the company's short-term interest-bearing liabilities were HK $15.9 billion and the paper cash balance was HK $15.1 billion, providing protection for the repayment of short-term debts.
Risk hint: the traffic flow of toll road is reduced, the utilization rate of logistics park is decreased, and the national expansion of comprehensive logistics port project is not up to expectations.