The current situation of the company

After the spin-off of the Yuji line, the company has further focused on the crude oil terminal business, and we expect the company's seven terminals to record 8 per cent throughput growth at 1H21, accelerating growth on the low base affected by last year's epidemic. Among them, the throughput of Tianjin and Caofeidian terminals is expected to grow faster, with a growth rate of more than 15%, mainly due to the low base brought about by the maintenance of major customers in the same period last year; Qingdao and Rizhao terminals, which cover Shandong and geochemistry, are expected to record a 6% growth rate; Ningbo terminal is expected to have roughly the same total 1H21 throughput, mainly due to the impact of the maintenance of its main customer CNOOC greenhouse Petrochemical in the first half of this year.

From a profit point of view, we expect to reflect the operational leverage effect brought about by throughput growth at the same time. Taking into account the expiration of the income tax exemption, we will begin to pay tax at the rate of 15% 6 this year (except for the third berth at Rizhao Terminal). We expect the return on investment to decline slightly At the same time, the insurance compensation brought about by the collision between Ningbo Port and Ningbo Port in 1919 is expected to be recorded in the first half of this year, bringing more than 10 million yuan in other benefits.

Comment

Merger and acquisition is expected to FY21 landing. Holding the funds from the sale of the Yuji line, the company expects to continue to make efforts in epitaxial mergers and acquisitions. We believe that the main direction of the company's acquisition is 1) the oil terminals or warehouses within the China Petroleum & Chemical Corp Group, such as Zhoushan Wharf, highly coordinated with the existing business. 2) overseas related business assets, but considering the overseas epidemic situation, we expect that mergers and acquisitions within the group will be the focus in the short term, and it is expected to land by the end of this year.

Overseas projects continue to grow. Taking into account the slight increase in rents and the 1H21 occupancy rate of close to 100%, we expect overseas VESTA and FOT projects to continue to record operating performance growth. Taking into account the appreciation of the RMB against the Hong Kong dollar during the reporting period, we expect 1H21 results to record 14% year-on-year growth.

Valuation and suggestion

Leave the earnings forecast and target price unchanged at HK $4.45, corresponding to 8 times FY21's price-to-earnings ratio and 55 per cent upside. Maintain an industry rating that outperforms. The company's current share price corresponds to 5 times FY21's earnings.

Risk.

New business exploration fell short of expectations; wharf and warehousing businesses were less profitable than expected.