The Port of Dalian released its 2016 annual report. In 2016, the company achieved operating income of 12.814 billion yuan (+44.2%), gross margin fell to 10.83% (-5.5pct), net profit attributable to the parent company was 531 million yuan (+9.6%), and EPS was 0.04 yuan. The company plans to pay a cash dividend of 0.15 yuan (tax included) for every 10 shares.
The rise in trade business led to a sharp rise in revenue. In 2016, the company achieved revenue of 12.814 billion yuan, an increase of 44.2% over the previous year. The main reason was that the company's trade business rose 101.8% year on year. The company's gross margin fell 5.6 percentage points. The main reason was the rise in trading business costs. Excluding the impact of the trade business, the company's gross margin fell by only 1.8 percentage points. The main reason was that the gross margin of oil, groceries, and value-added services declined compared to last year due to some rate reductions.
The overall performance of the company's business was impressive, and the passenger transportation and loading business declined slightly. The overall performance of the company's business in 2016 was impressive. Among them, oil throughput rose 11.2% year on year, container throughput rose 2.5% year on year, automobile vehicle business volume rose 18.7% year on year, ore throughput rose 26.7% year on year, miscellaneous goods throughput rose 7.6% year on year, and bulk grain throughput rose 10.7% year on year. The passenger roaming business declined slightly, achieving a 2.9% year-on-year decline in passenger throughput and a 3.6% year-on-year decline in rot-loading throughput. Under these circumstances, the company finally achieved a 44.2% year-on-year increase in revenue.
The company operates ports or benefits from port integration. As the largest port in Northeast China, Dalian Port is currently interconnected with more than 300 ports and regions around the world. Considering that the company operates a comprehensive range of ports and has strong business outreach capabilities, while China's major ports are speeding up transformation and audits to achieve integration of port resources, we anticipate that the company's port may become the core of port resource integration in Northeast China, enhance overall competitiveness, and achieve coordinated development.
Investment advice: We expect the company's 2017-2018 EPS to be 0.049 yuan and 0.053 yuan respectively, giving it an “increase in holdings - A” rating, with a target price of 3.30 yuan for six months.
Risk warning: Port throughput is declining.