Core Viewpoint - UBS has raised the target price for China Merchants Port (00144) from HKD 16.9 to HKD 17.5, reflecting better-than-expected container volumes and a decrease in the weighted average cost of capital under the assumption of a risk-free interest rate [1] Group 1: Financial Forecasts - UBS has increased the net profit forecast for China Merchants Port for the years 2025 to 2027 by 1% to 3% [1] - The company is expected to see a 6% year-on-year increase in recurring net profit for the first half of the year, driven by healthy growth in container volumes and a 3-4% increase in port charges both domestically and internationally [1] Group 2: Profit Adjustments - Despite the expected growth in recurring net profit, UBS anticipates a 9% year-on-year decrease in the company's net profit for the first half of the year due to abnormal items, including a net change in the fair value of financial assets/liabilities amounting to HKD 298 million and a compensation of RMB 317 million from a shipping company related to investments in Togo last year [1]

Group 1 - UBS raised the target price for China Merchants Port (00144) from HKD 16.9 to HKD 17.5, reflecting better-than-expected container volumes and a decrease in the weighted average cost of capital under the assumption of a risk-free rate [1] - UBS expects China Merchants Port's recurring net profit for the first half of the year to increase by 6% year-on-year, driven by healthy growth in container volumes and a 3-4% increase in port charges both domestically and internationally [1] - Despite the positive outlook, UBS anticipates a 9% year-on-year decrease in the company's net profit for the first half due to abnormal items, including a net change in the fair value of financial assets/liabilities of HKD 298 million and compensation of RMB 317 million from a shipping company related to its investment in Togo last year [1]

Core Viewpoint - UBS forecasts that China Merchants Port's recurring net profit for the first half of the year will increase by 6% year-on-year, driven by healthy growth in container volumes and a 3-4% year-on-year increase in port fees both domestically and internationally [1] - However, considering abnormal items, including a net change in fair value of financial assets/liabilities of HKD 298 million, UBS believes the company's net profit for the first half will decrease by 9% year-on-year [1] - UBS has raised the target price for China Merchants Port from HKD 16.9 to HKD 17.5, reflecting better-than-expected container volumes, and has adjusted its net profit forecasts for 2025 to 2027 upwards by 1-3%, maintaining a "Buy" rating [1] Summary by Category - **Profit Forecasts** - Recurring net profit expected to increase by 6% year-on-year [1] - Net profit expected to decrease by 9% year-on-year due to abnormal items [1] - **Container Volume and Fees** - Healthy growth in container volumes contributing to profit increase [1] - Port fees expected to rise by 3-4% year-on-year [1] - **Target Price and Ratings** - Target price raised from HKD 16.9 to HKD 17.5 [1] - Net profit forecasts for 2025-2027 adjusted upwards by 1-3% [1] - "Buy" rating maintained [1]

Group 1 - The stock price of China Merchants Port (00144.HK) closed at HKD 15.020 on May 28, 2023, marking a 1.49% increase from the previous trading day, with an intraday high of HKD 15.080, the highest in nearly a year [1] - On the same day, the net capital inflow was HKD 22.173 million, with a total of HKD 37.94312 million inflow and HKD 15.76944 million outflow [1] Group 2 - China Merchants Port Holdings Company, listed in Hong Kong since 1992, is a key subsidiary of China Merchants Group and a leading global port developer, investor, and operator [2] - The company has established a comprehensive port network across major coastal hubs in China and has successfully expanded its operations internationally, investing in 46 ports across 26 countries and regions as of December 31, 2023 [2] - In 2023, the container terminal throughput reached 137.48 million TEUs, and the bulk cargo throughput was 557 million tons [2] - The strategic vision of China Merchants Port is to become a "high-quality world-class comprehensive port service provider," focusing on "internal growth" and "innovation upgrades" to enhance global container throughput, market share, and operational efficiency [2]

Core Points - The company announced the maturity and repayment of its third phase of ultra-short-term financing bonds for 2024, which occurred on May 25, 2025 [2] - The company issued the bonds on November 25, 2024, with a total scale of 2 billion yuan and a maturity period of 180 days at a coupon rate of 1.96% [1] Summary by Sections - **Bond Issuance**: The company received approval for debt financing tools from the China Interbank Market Dealers Association, with a registration validity of 2 years from the date of the notice [1] - **Repayment Details**: The company successfully repaid the principal and interest of the ultra-short-term financing bonds on the due date [2] - **Official Announcement**: The announcement was made by the company's board of directors on May 27, 2025 [4]

Core Viewpoint - The company has initiated a share repurchase program to enhance shareholder value and reduce registered capital by repurchasing shares through the Shenzhen Stock Exchange at a maximum price of 31.50 CNY per share [2]. Group 1: Share Repurchase Plan - The company approved a share repurchase plan with a total funding amount between 195 million CNY and 389 million CNY, with a duration of 12 months from the approval date [2]. - The repurchased shares will be used for cancellation and reduction of registered capital [2]. Group 2: Repurchase Progress - As of April 30, 2025, the company has repurchased a total of 14,347,174 shares, accounting for 0.574% of the total share capital, with a total expenditure of approximately 278 million CNY [3]. - The highest transaction price during the repurchase was 20.99 CNY per share, while the lowest was 17.95 CNY per share [3]. Group 3: Compliance and Regulations - The company has established a dedicated securities account for the share repurchase, in compliance with relevant regulations [3]. - The repurchase activities are conducted in accordance with the Shenzhen Stock Exchange's self-regulatory guidelines and do not occur during periods that could significantly impact the stock price [4][5].

Financial Performance - Total revenue for 2024 reached HKD 11,842 million, a 3.1% increase from HKD 11,482 million in 2023[3] - Profit attributable to equity holders increased by 27.0% to HKD 7,919 million, compared to HKD 6,233 million in the previous year[3] - Regular profit rose by 22.6% to HKD 7,550 million, up from HKD 6,159 million in 2023[3] - EBITDA for the total business was HKD 7,043 million, reflecting a 6.6% growth from HKD 6,607 million[4] - Net cash generated from operating activities increased by 18.1% to HKD 8,547 million, compared to HKD 7,238 million in 2023[3] - Total assets decreased by 1.6% to HKD 169,474 million from HKD 172,314 million[3] - The company’s net interest-bearing debt and lease liabilities decreased by 8.0% to HKD 23,138 million from HKD 25,159 million[3] - The profit attributable to equity holders was HKD 7.919 billion, up 27.0% year-on-year, with recurring profit at HKD 7.550 billion, a 22.6% increase[19] - The group's revenue for the year ended December 31, 2024, was HKD 11.842 billion, an increase of 3.1% year-on-year, and a 9.0% increase when excluding the contribution from the sale of Ningbo Daxie in 2023[51] Market Expansion and Acquisitions - The company completed the acquisition of 51% stake in NPH in Indonesia, marking its entry into the Indonesian market[12] - The company completed the acquisition of 51% equity in the NPH project in Indonesia, marking its entry into the Southeast Asian market[18] - The company agreed to acquire a 70% stake in Vast in Brazil, which will become an indirect subsidiary, with its financial performance consolidated into the group's results[171] - The company is considering strategic acquisitions to bolster its logistics network, with potential targets identified in Southeast Asia[149] Container Throughput and Operations - The total container throughput for the company's global port projects was 145.75 million TEU, a growth of 6.0% compared to 2023[17] - The company's domestic and overseas port container business showed rapid growth, with domestic projects achieving a throughput of 108.91 million TEU, up 5.3% year-on-year[17] - The overseas port projects completed a total container throughput of 36.84 million TEU, reflecting an 8.1% increase year-on-year, with significant contributions from Sri Lanka's CICT and Brazil's TCP[47] - The Shenzhen western port area recorded a container throughput of 14.69 million TEU, marking a 19.3% increase year-on-year, benefiting from increased cargo volumes from emerging markets[41] ESG and Sustainability Initiatives - The company’s ESG rating was upgraded from BB to BBB by MSCI, the highest rating among port companies listed in mainland China and Hong Kong[13] - The company received an upgraded ESG rating to BBB from MSCI, the highest rating among port companies listed in mainland China and Hong Kong[38] - The group emphasizes sustainable development, integrating compliance management and operational practices to minimize environmental impact[68] - The company is focusing on green transformation by increasing the proportion of clean energy and exploring clean energy refueling business[76] - A new sustainability initiative is being implemented, aiming to reduce carbon emissions by 30% over the next five years[146] Strategic Focus and Future Outlook - The company aims to enhance core competitiveness and strengthen global layout through innovation and operational efficiency in the upcoming "15th Five-Year Plan" period[23] - The company is focusing on "global layout," "lean operations," and "innovation upgrades" as its strategic pillars for future growth[24] - The company aims to enhance its core competitiveness by optimizing its six strategic frameworks, including overseas strategy and innovation strategy[75] - The company will implement a "15th Five-Year Plan" focusing on reform, innovation, and development to ensure high-quality completion of its strategic goals[75] Governance and Board Structure - The board consists of 10 members, including 2 non-executive directors and 5 independent non-executive directors, ensuring strict oversight of management processes[108] - The company has a strong governance structure with multiple committees including audit, remuneration, and nomination committees[150][152][153][155] - The board has adopted a standard code of conduct for securities trading, confirming compliance by all directors during the year[100] - The company emphasizes the importance of independent directors in enhancing corporate governance and accountability[152][153] Employee and Community Engagement - The group has initiated the "Hundred Seedling Program" to innovate graduate recruitment and training models, and the "Living Water Program" to facilitate internal talent mobility[66] - The group is focused on enhancing employee welfare and recognition to foster a sense of belonging and shared interests with the organization[67] - The group is actively promoting community integration through various public welfare projects, enhancing communication and collaboration with local communities[71] Financial Management and Reporting - The company has engaged KPMG as the external auditor, with fees totaling HKD 13 million, including HKD 11 million for audit services and HKD 2 million for non-audit services[120] - The board is responsible for ensuring that the financial statements accurately reflect the group's financial position, performance, and cash flows for the fiscal year ending December 31, 2024[119] - The audit committee is tasked with reviewing the integrity of the company's financial statements and ensuring compliance with applicable accounting standards and regulations[4] - The company has established a comprehensive internal control system to ensure effective risk management and safeguard shareholder investments[122]

Financial Performance - The profit attributable to equity holders was HKD 7.919 billion, up 27.0% from HKD 6.233 billion in 2023 [4] - The basic earnings per share increased to HKD 1.886, a rise of 23.1% compared to HKD 1.532 in 2023 [4] - Revenue for the year was HKD 11.842 billion, representing a growth of 3.1% from HKD 11.482 billion in 2023 [5] - The regular profit attributable to equity holders was HKD 7.550 billion, up 22.6% from HKD 6.159 billion in 2023 [4] - The final dividend per share was HKD 0.636, compared to HKD 0.48 per share in 2023 [4] - The group reported a profit attributable to equity holders of HKD 7,919 million in 2024, up from HKD 6,233 million in 2023, representing a growth of 27% [29] - The proposed final dividend per ordinary share increased to HKD 0.636 in 2024 from HKD 0.48 in 2023, totaling HKD 2,670 million compared to HKD 2,015 million in the previous year [28] Revenue Breakdown - Revenue from port operations was HKD 10,992 million, up from HKD 10,680 million, reflecting a growth of 2.92% [13] - Revenue from bonded logistics business was HKD 639 million, an increase from HKD 593 million, representing a growth of 7.77% [13] - Revenue from mainland China, Hong Kong, and Taiwan was HKD 6,004 million, a decrease of 5.43% from HKD 6,348 million in 2023 [16] - Revenue from Brazil increased to HKD 2,237 million, up 13.14% from HKD 1,977 million in 2023 [16] - Total revenue for the year ended December 31, 2023, was HKD 11,482 million, with a significant contribution from the port business at HKD 10,680 million [18] Container Throughput - The total container throughput reached 145.75 million TEU, an increase of 6.0% year-on-year (2023: 137.48 million TEU) [4] - The group's port container throughput reached 145.745 million TEU in 2024, representing a year-on-year growth of 6.0% [45] - Domestic ports in mainland China, Hong Kong, and Taiwan achieved a container throughput of 108.91 million TEU, up 5.3% year-on-year, driven by growth in Shenzhen's western port area and the Yangtze River Delta [44] - Overseas port projects completed a total container throughput of 36.84 million TEU, reflecting an 8.1% increase year-on-year, with significant contributions from Sri Lanka's CICT and Brazil's TCP [52] Assets and Liabilities - The total assets decreased to HKD 169.474 billion from HKD 172.314 billion in 2023 [9] - The total equity rose to HKD 121.432 billion, compared to HKD 120.845 billion in 2023 [9] - Total liabilities stood at HKD 48,042 million, reflecting the company's financial obligations across its operations [20] - The group's total assets as of December 31, 2024, were HKD 169.474 billion, remaining stable compared to the beginning of the year, while total liabilities decreased by 6.7% to HKD 48.042 billion [55] Capital Expenditure - Capital expenditure for the year was HKD 1,478 million, which includes HKD 429 million for port operations and HKD 884 million for other investments [17] - Capital expenditures for the year amounted to HKD 1,873 million, demonstrating the company's commitment to expansion and investment in infrastructure [18] - The group's capital expenditure for the year was HKD 1.478 billion, and it maintained a strong financial position with sufficient unutilized bilateral bank loan limits of HKD 13.744 billion [59] Operational Efficiency and Innovations - The company has implemented a "lean operation" system, enhancing engineering management and business control capabilities [41] - The company is advancing its green transformation by replacing 185 units of new energy trucks and investing in charging stations at Shenzhen's western port area [42] - The company is collaborating with AI model manufacturers to launch equipment operation assistants and port service assistants, enhancing operational efficiency [41] - New technology initiatives are underway, with a focus on automation and digitalization to enhance operational efficiency, projected to reduce costs by 10% [94] Market Outlook and Strategy - Future outlook includes continued focus on market expansion and potential acquisitions to enhance growth opportunities [18] - The group expects global economic growth to be 3.2% in 2024, with developed economies growing at 1.7% and emerging markets at 4.2% [34] - The company aims to enhance its core competitiveness by optimizing its strategic framework, focusing on six key strategies including overseas strategy and low-carbon strategy [79] - The company plans to expand its market presence by investing in new terminal facilities, aiming for a 20% increase in capacity by 2026 [96] Sustainability and Governance - The company is committed to sustainable development, integrating it into investment, operations, and management, and has received an upgraded ESG rating to BBB from MSCI [75] - The company recognizes the importance of ecological and biodiversity protection, implementing measures to reduce operational impacts on marine ecosystems [71] - The company is focused on enhancing community engagement through various public welfare projects, contributing to local economic growth [72] - The company is committed to maintaining high standards of corporate governance to enhance investor confidence and shareholder returns [83] Employee and Talent Management - The group employed 8,713 full-time staff, with total salaries paid amounting to HKD 2.288 billion, representing 29.3% of total operating expenses [67] - The group has implemented a talent management initiative called the "Hundred Seedling Plan" to enhance talent development and retention [67]

20 March 2025 | 3:55AM HKT China Ports Simon Cheung, CFA +852-2978-6102 | simon.cheung@gs.com Goldman Sachs (Asia) L.L.C. Volume decelerating with limited upside on ASP in 2025; d/g CMPort to Neutral, Sell SIPG; Buy COSCO Ports We turn more cautious on the ports sector, especially after share price rally for most port names since 2024. Looking into 2025, we forecast the port container throughput may decelerate to 1% YoY growth for major ports in China, considering: 1) as flagged in our sector Repositioning ...

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