Guotai Junan (Hong Kong) : Maintain China Merchants Port collection rating target price of HK $17.50

2022-06-13 0 By

Ports (the “Company”) exceeded our expectations in 2021.Mainly due to the low base in 2020 port throughput growth, rate increase and the merger of Ningbo Daxie Container Terminal, the company’s revenue in 2021 increased rapidly by 32.5% year-on-year to HK $11.85 billion, basically in line with market expectations and slightly exceeded our expectation of 5.2%.In 2021, the company’s container throughput reached 135 million TEU, up 12.0% year on year.The company’s gross margin increased 3.3 percentage points year on year to 45.2%, better than we expected, helped by higher revenue per case.Net profit attributable to shareholders increased 58.1% year on year to HK $8.144 billion in 2021, beating our previous earnings forecast and beating our expectations by 9.3%.We expect long-term throughput growth to be above industry average, and port end rates are expected to benefit from the high boom in the shipping industry.Although short-term throughput growth may be disrupted by the outbreak in China, we expect the impact to be minimized due to the normal operation of our terminals.In the longer term, we expect corporate throughput to benefit from the RCEP agreement on intra-regional trade in Asia.In addition, port end rates are expected to benefit, given continued congestion issues, higher demand for supply chain security and a better balance between supply and demand in the shipping industry.Maintain ‘collect’ rating and raise target price to HK $17.50.Depending on the perfect global network layout, the company’s return on equity is expected to improve in the integration of internal resources.Our price targets correspond to 8.0, 7.7 and 7.3 times 2022-2024 p/e.