20130729-美银美林-1H13E_aggregate_earnings_slightly_down__Buy_Dalian_Port_28页_574kb

1H13E Aggregate Earnings and Stock Picks Summary

Core Content

This report provides an analysis of the performance of major Chinese ports in the first half of 2013, with a focus on earnings growth, throughput volume, and valuation metrics. It highlights the performance of individual ports and offers stock recommendations based on their financial outlook and market position.

Main Points

• Aggregate Earnings Growth: The aggregate earnings growth for Chinese ports in 1H13 is expected to decline slightly by 1% YoY, with strong growth at Dalian Port (27% YoY), moderate growth at China Merchants (12% YoY), and mild growth at Tianjin Port (3% YoY).
• Earnings Decline Factors: HPH Trust experienced a 22% YoY decline, while Cosco Pacific saw a 8% YoY decline due to weak performance and cost pressures.
• Throughput Volume Growth: The top-8 ports in China saw an 8% YoY increase in throughput volume, driven by strong domestic trade (17% YoY) and increased transshipment volumes.
• Regional Performance:
  • Bohai Rim ports showed the strongest growth at 13% YoY.
  • Yangtze River Delta ports grew by 8.5% YoY.
  • Pearl River Delta ports had a slower growth of 2.3% YoY.
• Transshipment Impact: Transshipment trade volumes contributed significantly to foreign trade growth, but they are less profitable than O&D (origin and destination) cargos, leading to margin pressure.
• Margin Contraction: Due to the increasing share of domestic trade and transshipment, the overall profit margin for container ports is expected to contract by 1–3%.
• Stock Picks: The report recommends buying Dalian Port, Tianjin Port, and Cosco Pacific, citing strong performance and positive outlooks.
  • Dalian Port: Expected to report RMB380mn in 1H13 earnings, a 27% YoY increase, driven by oil business recovery and LNG growth.
  • Tianjin Port: Demonstrates stable earnings growth and attractive valuation.
  • Cosco Pacific: Expected to use proceeds from CIMC stake disposal to pay dividends and acquire new ports, potentially boosting share price.

Key Information

• Dalian Port:

  • 1H13 earnings: RMB380mn (up 27% YoY).
  • 2Q13 earnings expected to surge 52% YoY.
  • Oil throughput: 10mn tons in 2Q13 (up 19% YoY).
  • Container throughput: 4.2mn TEUs (up 23% YoY).
  • Price Objective: HK$2.70.
  • Valuation: P/E 8.2x, EV/EBITDA 6.53x, Dividend Yield 4.9%.

• China Merchants:

  • 1H13 earnings: HKD1,803mn (up 12% YoY).
  • Rating: Neutral.
  • Valuation: P/E 14.0x, EV/EBITDA 8.3x, Dividend Yield 3.6%.

• Tianjin Port:

  • 1H13 earnings: HKD382mn (up 3% YoY).
  • Rating: Buy.
  • Valuation: P/E 8.4x, EV/EBITDA 6.4x, Dividend Yield 5.3%.

• Cosco Pacific:

  • 1H13 earnings: USD164mn (down 8% YoY).
  • Rating: Buy.
  • Valuation: P/E 41.0x, EV/EBITDA 6.5x, Dividend Yield 1.0%.

• HPH Trust:

  • 1H13 earnings: HKD813mn (down 22% YoY).
  • Rating: Underperform.
  • Reasons for decline: HK labor strike, poor volume growth, and deteriorated throughput mix.

Summary Table

Valuation Insights

• Dalian Port has a P/E of 8.2x, EV/EBITDA of 6.53x, and high dividend yield.
• Tianjin Port has a P/E of 8.4x, EV/EBITDA of 6.4x, and attractive valuation.
• Cosco Pacific has a P/E of 41.0x, EV/EBITDA of 6.5x, and dividend yield.
• HPH Trust has a P/E of 24.7x, EV/EBITDA of 14.3x, and underperformance.

Conclusion

The report highlights the mixed performance of Chinese ports in 1H13, with Dalian Port and Tianjin Port showing strong growth and attractive valuations, while HPH Trust and Cosco Pacific face challenges. The analyst recommends buying Dalian Port, Tianjin Port, and Cosco Pacific due to their potential for recovery and growth, despite the overall decline in aggregate earnings.