The performance in 2020 slightly exceeded our expectations
The company announced its 2020 results: revenue was 21.27 billion yuan, down 16% from the same period last year; net profit from home was 3.43 billion yuan, up 2.8% from the same period last year, corresponding to 0.22 yuan per share, slightly exceeding expectations, mainly due to higher-than-expected profits driven by business volume in the fourth quarter. 4Q20's operating income was 8.28 billion yuan, an increase of 2% over the same period last year, and its net profit was 720 million yuan, an increase of 79% over the same period last year.
Throughput and operating performance improved synchronously. Thanks to the good domestic epidemic control and the advantages of the complete industrial chain, China's foreign trade exports are growing against the trend. Ningbo Port, which ranks first in cargo throughput and second in container throughput, directly benefited from it: the company's cargo throughput and container throughput became regular in April and June, and achieved 5.1% and 4.3% year-on-year growth in 2020, respectively.
Trend of development
The acquisition of competitive assets in the same industry will help the company to fully co-ordinate and make full use of the province's coastal port resources to participate in market competition. The announcement of the acquisition of equity and related party transactions was disclosed on November 27, 2020, with a transaction consideration of 5.642 billion yuan in cash to acquire shares in competitive assets of the relevant industry. After the acquisition, a new port development pattern of "one body, two wings and multiple links" will be formed, with Ningbo Zhoushan Port as the main body, Wenzhou Port and Taizhou Port along the southeast coast of Zhejiang Province and Jiaxing Port around Hangzhou Bay in northern Zhejiang as two wings. We believe that this acquisition will help the company to optimize route layout and logistics network, avoid homogeneous business competition, improve the construction of cargo procurement system, vigorously develop the potential of stock business, enhance the market scale and the core competitiveness of the main ports in the province, and maintain a steady improvement in cargo throughput. The company plans to spin off and list its shipping assets (Ningbo Cosco) (announcement of December 30, 2020), which will also contribute to the better development of the business.
With the introduction of Shanghai Port as a strategic investor, the regional integration of the Yangtze River Delta has been further accelerated. In August, the company completed a private placement of 9.67 billion yuan to Ningbo Zhoushan Port Group and Shanghai Port Group. After the additional offering, Shanghai Port Group held a 5% stake in the company, became a strategic investor and nominated a non-independent director. the two sides carry out strategic cooperation in the areas of comprehensive port development, construction, operation and management on the principle of mutual benefit, such as joint participation in the development of Xiaoyangshan Port area. We believe that Shanghai Port and Ningbo Port are geographically adjacent, and there are both competition and cooperation. This time, through the ties at the capital level, it will help the two sides to integrate their respective assets and give full play to their comparative advantages. in order to achieve the long-term and healthy development of the entire Yangtze River Delta port group.
Profit forecast and valuation
Due to the continued growth in throughput, we raised our 2021 net profit forecast by 12% to 4.09 billion yuan, and introduced a net profit of 4.444 billion yuan in 2022. The current share price corresponds to a price-to-earnings ratio of 15.8 times 2022 / 14.5 times earnings. To maintain a neutral rating, we raise our target price by 11% to 4.89 yuan corresponding to 19 times 2021 earnings and 17 times 2022 earnings, which is 19.9% upside from the current stock price.
Risk.
The growth rate of throughput was lower than expected, and the loading and unloading rate declined.