Event: the company achieved toll income of 3.702 billion yuan (+ 26.8%) in 2021; net profit of 1.465 billion yuan (+ 812.8%); and asset-liability ratio of 59.4%, down 3.1 percentage points from 2020.
The company paid a dividend of HK $0.61 per share for the whole year, a record high.
The profit from the superimposed issuance of REIT with low base performance in 2020 brought a substantial increase in net profit, while the toll income alone was slightly lower than expected: the company's net profit from returning to its mother increased significantly, on the one hand, due to the low profit base due to the impact of 79 days of free highway during the epidemic last year, and on the other hand, because the company split Hanxiao Expressway to issue REITs, achieving a profit of 960 million yuan (before tax). In terms of toll revenue alone, the company's average daily toll income in 2021 is basically the same as in 2020, slightly lower than we expected.
The diversion of the road network and the impact of the epidemic have led to slightly lower profit expectations: in May and December in Guangdong, August and October in Hunan and Hubei, temporary control measures have been taken due to the impact of the epidemic, so the company's full-year profits have been negatively affected.
In addition, some of the new lines opened in 2020 diverted the company's existing lines, such as the Guangfo-Zhao Expressway in December 2020, and the Guangzhou second Ring Road and West second Ring Road (joint venture) expressways. Suiyue Nan Expressway is affected by Zaoqian Expressway and the opening of Shishou Bridge. The road production of Guangzhou North second Ring Road and Hubei Suiyue South Expressway, as the top two of the company's revenue, are affected by road network diversion, with daily toll revenue falling by 3.0% and 7.3% respectively, which is also the reason for slightly lower earnings expectations.
There is still a lot of room for improvement in the newly acquired road products: the road production income of the three Hubei provinces that the company acquired in 2019 continued to rise, and the average daily toll income of Hanchai, Han-E and Da-Guang-Nan Expressway increased by 13.3%, 11.9% and 4.2% respectively compared with the same period last year. With the commissioning of Shunfeng Ezhou Airport and the opening of the surrounding lines, there is still much room for improvement in the income of Han-E and Da-Guang-Nan Expressway.
The impairment affects the return net profit of about 172 million yuan: the company reduced the value of Tianjin Jinxiong Expressway by 97 million yuan during the reporting period, affecting the return net profit of about 44 million yuan; at the same time, the investment of the participating company Humen Bridge was reduced by 128 million yuan. Taken together, the net profit affected by the two is about 172 million yuan.
The issuance of REIT earned 960 million yuan and achieved a large amount of cash back: this year, the company spun off mature Road to produce Hanxiao Expressway, which was used as the underlying asset to successfully issue Huaxia Yuexiu Expressway REIT and subscribed for a 30% share of REIT. After the completion of the operation, the company returned about 1.4 billion yuan in cash, made a profit of 960 million yuan, and still held 30% of the shareholders' rights and interests of Hanxiao Expressway.
The company has rich experience in self-training and operation in the acquisition of road products, most of its road products are purchased from the outside, and the profits are good after being placed into the company. However, the way of acquisition and training still has the problems of large amount of funds and long payback period of investment. The REITs model helps to achieve the return on investment ahead of time and accelerate the return of funds. The success of this model is of great benefit to the company.
Profit forecast and investment advice: considering that the epidemic will still have a negative impact on the industry this year, we have lowered the company's profit forecast; the split of Hanxiao Expressway will also lead to a reduction in the company's return net profit. It is estimated that the 22-24 year return net profit of the company is 9.50,11.16 and 1.218 billion yuan respectively, corresponding to PE of 7.3,6.3 and 5.7 times. The dividend ratio of the company in 21 years is 60%, and the dividend amount has reached a new high. it is very likely that the dividend ratio will be maintained at about 60% in the next few years, and the dividend yield will exceed 8% based on the 22-year profit forecast.
To maintain the company's "highly recommended" rating.
Risk tips: major changes in industry policy, the decline in economic growth, the impact of the epidemic.