Summary of COSCO SHIPPING Ports (1199.HK) Conference Call Company Overview - **Company**: COSCO SHIPPING Ports (CSP) - **Ticker**: 1199.HK - **Market Cap**: HK$17,979 million (US$2,313 million) [3] Financial Performance - **FY24 Core Profit**: US$60 million, down 31% YoY and 27% QoQ [1] - **Total Gross Throughput**: Increased by 3.2% YoY but decreased by 2% QoQ [1] - **Consolidated Throughput**: Decreased by 5% QoQ [1] - **Average Revenue per Gross TEU**: Decreased by 6% YoY and increased by 1% QoQ [1] - **ASP Decline**: Chinese subsidiaries saw a 2.5% YoY decline, while European subsidiaries experienced a 3% YoY decline [1] - **Gross Profits**: Declined by 2% QoQ, with notable changes in key ports: Tianjin -22%, Spain +16%, Piraeus +10% [1] - **Total Costs per Gross TEU**: Increased by 1% YoY and 7% QoQ [1] - **Core Profit Margins**: Declined by 6 percentage points to 15% [1] - **Net Gearing (ex lease)**: Stood at 0.3x as of Dec 2024 [1] - **Dividend**: Declared a second interim dividend of HK$0.142 per share, going ex-dividend on April 3, 2025 [1] Future Guidance - **Throughput Growth Guidance for 2025E**: Low-single-digits growth expected [2] - **Investment Rating**: Maintained a Buy rating despite FY24 core earnings being 8% below consensus due to attractive valuation [2] Valuation Metrics - **Current Price (as of March 21, 2025)**: HK$4.78 [3] - **Target Price**: HK$5.90, implying a potential share price return of 23.4% and an expected dividend yield of 7.1% [3] - **Expected Total Return**: 30.5% [3] Risks and Considerations - **Downside Risks**: - Potentially aggressive capital expenditures that could erode free cash flow [20] - Disappointing actual deliveries compared to targets and consensus [20] - Suboptimal acquisitions and divestments leading to ROEs below capital costs [20] - Longer-than-expected downturns in global container demand [20] - Elevated inflation affecting earnings yield spread [20] - **Upside Risks**: - Capacity discipline among liners to avoid price wars [20] - Stronger-than-expected demand and effective cost controls [20] - Decline in bond yields [20] Key Financial Metrics (Summary) - **Net Profit**: - 2022A: US$304 million - 2023A: US$321 million - 2024E: US$295 million - 2025E: US$323 million - 2026E: US$342 million [5] - **Diluted EPS**: - 2024E: US$0.08 - 2025E: US$0.09 - 2026E: US$0.10 [5] - **P/E Ratio**: - 2024E: 7.4x - 2025E: 6.8x - 2026E: 6.4x [5] Conclusion CSP is navigating a challenging environment with declining core profits and throughput but maintains a positive outlook for future growth. The company's valuation remains attractive, supporting a Buy rating despite recent performance setbacks. Investors should be aware of both the risks and potential upside factors as they consider their investment strategies.