Recurring net profit for the 1st quarter of 2021 exceeded our expectations
The company's revenue increased 20% year over year to $265 million in the first quarter of 2021, and net profit to the parent fell 21% year over year to $73 million ($0.02 per share). Excluding the after-tax revenue of 61.5 million US dollars from the sale of its Yangzhou terminal and Zhangjiagang terminal interests in the first quarter of 2020, the company's recurring net profit increased 140% year-on-year, exceeding our expectations, mainly due to significant improvements in the profitability of joint ventures.
We believe the high growth in the company's performance was due to increases in throughput and ASP. The company's equity throughput increased 7.2% year over year to 9.3 million TEUs in the first quarter of 2021, maintaining a restorative growth trend. As shipping companies' profitability increased due to rising freight rates, combined with the impact of the company's optimization of port portfolios and exchange rates, ASP also increased, and terminal profits increased 76% year over year to $94 million.
Development trends
The goal for the next five years is to increase throughput and reduce costs. The company reiterated its confidence in achieving its new five-year plan for 2021-2025. The planned equity throughput reached 57 million TEUs (corresponding to a CAGR of 8.2%), and unit operating costs were reduced by 15-20% (corresponding to a CAGR of 3-4%). During the last five-year planning period (2016-2021), the company's planned equity throughput, total assets, and net profit increased by 60%, 50%, and 100%, and is steadily achieving these goals. Compared with previous goals, we believe that the new plan places more requirements on lean operation and pays more attention to improving terminal efficiency. In addition to this, the company continues to explore strategically important holding terminals and highly profitable participating terminals around the world, continuously optimizes the global terminal portfolio, and continues to explore emerging markets to achieve continuous increases in throughput and profitability.
A healthy financial situation is expected to guarantee the dividend ratio. Given the company's ample cash position (the company's cash on hand reached $1.3 billion in the first quarter of 2021) and sound financial leverage, management once again promised to maintain a 40% dividend rate. Based on this policy, we expect the company's 2021-2022 dividend yield to reach 5.6% and 5.8% compared to the closing price on April 27, 2021.
Profit forecasting and valuation
Considering the increase in the company's ASP and throughput, we raised our 2021 and 2022 earnings forecasts by 18% and 15% to $380 million and $399 million. The current stock price corresponds to 7.0 times the 2021 price-earnings ratio and 6.7 times the 2022 price-earnings ratio. We maintained our outperforming industry ratings and raised our target price by 18.0% to HK$7.86, corresponding to 8.6 times the 2021 price-earnings ratio and 8.2 times the 2022 price-earnings ratio. There is room for an increase of 22.4% from the current stock price.
risks
Throughput or ASP drops; costs are rising more than expected.