The company is the world's largest dry bulk public terminal operator. Qingang Co., Ltd. operates the three ports of Qinhuangdao Port, Caofeidian Port, and Huanghua Port, all located in the Bohai Rim region. The company mainly undertakes cargo handling, storage, warehousing, transportation and logistics services, and provides port value-added services such as tugboats, cargo handling, and coal distribution. The company's business categories include coal, metal ores, oil and liquid chemicals, containers and other miscellaneous goods. Among them, the coal business accounted for 71.89% of the company's business revenue in 2016.
The main launch port on the Daqin Line has benefited from a recovery in traffic on the Daqin Line. The company's Qinhuangdao Port is located at the eastern end of the Daqin Line, the heavy-duty transportation channel with the largest loading capacity in China. It is the main sewage port for transporting coal on the Daqin Line. In 2016, due to weak demand for coal and the opening of the Zhanchi Line and the Zhangtang Line diverted supplies from Mengxi, the coal traffic volume of the Daqin Line declined, and the company lost its supply of high-quality coal, which in turn caused the company's revenue in 2016 to drop 28.72% year-on-year. In 2017, as demand for coal improves and supplies gradually return, the company's revenue is expected to bottom out.
Lay out the iron ore business ahead of time to seize import substitution opportunities. Hebei Province is the largest steel production base in China, and iron ore is in high demand. As international iron ore prices have continued to decline in recent years, advantages such as high grade and low cost of imported iron ore have become more and more prominent, and China's iron ore imports have continued to rise. Qinhuangdao Port is close to Tangshan, the Caofeidian Port Area is located in Tangshan, and the Huanghua Port Area is directly connected to central and southern Hebei regions such as Handan via the Hanhuang Railway. The company's three operating regions will all benefit from the increased demand for iron ore imported from steel bases. For this reason, the company set up ahead of schedule and invested in the first phase of the Huanghua Port Bulk Cargo Port Area Ore Terminal Project. It is expected that the company's iron ore revenue growth will increase further after completion and commissioning.
Fundraising projects have consolidated their main business, and a comprehensive major port is beginning to take shape. The company plans to publicly issue no more than 558 million shares, raising a total of 2.5 billion yuan. The funds raised will be used for equipment purchases in Qinhuangdao, the first phase of the ore terminal project in the bulk cargo port area of Huanghua Port, and supplementary working capital. The Huanghua port area has designed and built more than 100 berths of various types, with an annual passing capacity of more than 500 million tons. It will eventually become a comprehensive port integrating various functions such as ore, miscellaneous goods, containers, and petrochemicals.
Investment advice: Considering the changes in the company's share capital after the initial public offering of A shares, it is estimated that the company's fully diluted EPS in 2017-18 will be 0.09 and 0.10 yuan. The comparable company's average PE in 2017 was 37.22 times, and the company's reasonable price was 3.40 yuan; if you take the comparable company's average PB1.68 times in 2017, the company's reasonable price was 3.62 yuan. Based on comprehensive considerations, we believe that the company's reasonable price is in the range of 3.40-3.62 yuan.
Risk warning: the return of high-quality goods falls short of expectations, and the recovery in coal demand falls short of expectations