This report is read as follows:

The huge capital expenditure in the future will restrict the company's ability to pay dividends.

Main points of investment:

The epidemic affected throughput and rates, lowering the target price to 2.75 yuan (the original forecast was 3.1 yuan) and maintaining a "neutral" rating. In the short term, the epidemic affected cargo throughput and port rates, resulting in lower-than-expected profits. In the medium to long term, huge capital expenditure restricts the ability to pay dividends. The forecast EPS for 2020-21 will be reduced to 0.24,0.25 yuan (the original forecast is 0.28,0.32 yuan), and the forecast EPS for 2022 will be increased to 0.27 yuan. According to DCF valuation method and comparable company PE, the target price is reduced to 2.75 yuan.

The epidemic led to lower-than-expected revenues and profits in 2020. The epidemic has led to a low growth rate of port throughput, and the port toll reduction policy introduced in response to the epidemic has further depressed profit growth. Fortunately, infrastructure investment has strengthened in the second half of the year, and the growth rate of throughput has rebounded, and it is expected to achieve relatively rapid growth for the whole year.

With the recovery of the global economy in 2021, the growth rate of port throughput is expected to continue to grow rapidly.

Capacity investment attracts supply, and profits are expected to grow slowly. With the completion of the reconstruction of berths 5 and 6 in the south of Shiju Port area, the construction of berths 6 and 7 in the steel boutique base, and the completion and acceptance of berths 14 and 15 and Lannan 15 in the south of Shijiu Port area, the handling capacity has increased. It is expected to expand the hinterland and attract more cargo sources, and the throughput and profit are expected to increase slowly.

Huge capital expenditure will dampen dividends. The estimated capital expenditure of the project under construction still has 9 billion yuan left to be invested, and new capital expenditure items may be added in the future. However, the net profit and depreciation amortization in 2019 is only about 1.2 billion yuan, which will grow slowly in the future. It is expected that the profits over the next decade will be mainly used for capital expenditure, with limited dividends.

Risk analysis. Investment in low-return business, over-investment in the port industry, intensified competition in the surrounding ports, port fee reduction policy reappeared.