Incidents:
The company announced its report for the third quarter of '17. In the first three quarters, the company achieved revenue of 5.23 billion yuan (+54.04%), net profit of 857 million yuan (+451%), net profit of 804 million yuan (+615%) after deduction, basic EPS of 0.17 yuan (+467%), and weighted ROE of 7.13% (+5.79%).
Comments:
1. Q3 performance grew steadily, in line with market expectations
In the third quarter, the company achieved operating income of 1,837 million yuan (+82.4%), operating costs of 1,135 million yuan (+39.3%), gross profit of 702 million yuan (+265%), and gross profit margin of 38.2% (+19.1pct). The company's three expenses were 353 million yuan (+47.5%), operating profit of 301 million yuan (16Q3 loss), and net profit of the mother was 240 million yuan (+1217%), in line with market expectations.
2. The three major operating port areas, with coal as the core business
Currently, Qin Port Co., Ltd. mainly operates in the three major operating regions of Qinhuangdao Port, Caofeidian Port Area, and Huanghua Port Area.
1) Qinhuangdao Port Area: Qinhuangdao Port is the main hub port of China's “West Coal to the East” and “North Coal to the South” energy transportation channels, and currently the world's largest public coal terminal. Qingang Co., Ltd. operates 50 berths at Qinhuangdao Port, including 23 for coal, 7 for oil and liquid chemicals, and 17 for ores and other groceries; Xingang Container Company operates 3 container berths.
2) Caofeidian Port Area: Caofeidian Port is the only natural port in Bohai Bay that can build large deep-water berths of 300,000 tons or more without excavating waterways and port pools. It has excellent port building advantages. Caofeidian Coal Company is constructing 5 coal berths; Caofeidian Industrial Company (compared to holding 35%) owns 6 ore berths.
3) Huanghua Port Area: The Huanghua port area is close to the economic hinterland of south-central Hebei Province and northwestern Shandong Province. It is also one of the most convenient and economical ports of entry to the sea in central and southern Hebei. Cangzhou Bohai Company operates 2 general bulk cargo berths, 2 general bulk cargo berths and 4 multi-purpose berths, while Cangzhou Ore Company operates 2 dedicated ore berths.
3. Traffic volume on the Daqin Line was strong, and performance recovered strongly
The Daqin Line is the special railway with the largest carrying capacity for heavy-duty coal transportation in China. It is the most important strategic channel for “West Coal Transportation to the East” and “North Coal Transportation to the South”. The Qinhuangdao Port and Caofeidian Port Area are connected to the “Three West” regions of China's major coal-producing regions through the Daqin Line and its branch lines, the Qiancao Line, the Zhangtang Railway, etc., and are the main seaports for transporting coal from the region.
4. Profit prediction and valuation
We forecast the company's EPS for 17/18/19 to be 0.19/0.21/0.22 respectively, corresponding to the current stock price PE42.1/38.6/36.3X. Consider thematic opportunities such as the integration of Hebei ports and maintain the “Highly Recommended - A” investment rating.
5. Risk warning: market competition intensifies, port integration falls short of expectations