1Q22 performance is in line with our expectations

The company announced 1Q22 results: revenue of 1.07 billion yuan, down 15.3% from the same period last year; net profit of 430 million yuan, corresponding to 0.21 yuan per share, an increase of 8.0% over the same period last year, deducting 400 million yuan of non-net profit, an increase of 2.2% over the same period last year, which is in line with our expectations. Affected by the epidemic in Guangdong Province in the first quarter, the company's toll income declined, but depreciation amortization and maintenance costs decreased. The company's 1Q22 gross profit margin reached 67.7%, an increase of 3.7ppt compared with the same period last year, and profitability improved slightly. In addition, it was confirmed that Yue Hi-Tech equity transfer income of 13.549 million yuan, 1Q22 company net profit still maintained growth.

Trend of development

The impact of the epidemic superimposed Guangfo expired, 1Q22 toll revenue declined. Since January 2022, the epidemic has spread at many points in Guangdong Province, and control measures have been implemented in related areas and toll stations. Among them, the Guangzhou-Zhuhai section of the Beijing-Zhuhai Expressway and Guanghui Expressway are greatly affected, with 1Q22 traffic volume of-24% less than that of the same period last year, and toll revenue of-21% and 13% of the same period last year. At the same time, according to the company announcement, from 00:00 on March 3, 2022, tolls will be stopped on the Guangfo Expressway, but the company will continue to be responsible for road management and maintenance. Guangfo's revenue in 2021 is about 450 million yuan, accounting for 8.5% of the company's revenue. the suspension of tolls on Guangfo Highway has a certain negative impact on the company's first-quarter results.

In the long run, we believe that the company is both growing and defensive:

The holding road product is superior, the location advantage is obvious. The company's holding road products are located on the main traffic roads in Guangdong Province. we believe that the traffic flow has a certain growth, at the same time, the epidemic situation in Guangdong Province is well controlled, and we expect the company's traffic flow to return to steady growth after the epidemic is stable.

The proportion of dividends is high, and the value of defense is highlighted. In 2021, the company's DPS is 0.57 yuan, the dividend ratio is 70%, and the dividend yield is 7.2%. According to the announcement of the "shareholder return Plan for the next three years (2021-2023)" issued by the company, the dividend ratio in the next three years is not less than 70%, which is currently one of the companies with the highest dividend ratio of listed companies, with strong defensive value.

Profit forecast and valuation

Keep profit forecasts for 2022 and 2023 unchanged. The current A-share price corresponds to a price-to-earnings ratio of 10.5 times 2023 / 9.3 times earnings and a dividend yield of 6.7% / 7.5% in 2022 prime. To maintain the outperform industry rating, in view of the large volatility in the overall market and the company's defensive value, we raised the company's target price by 10.0% to 9.28 yuan, corresponding to 12.2 times 2022 price-to-earnings ratio and 11.0 times 2023 price-to-earnings ratio, which is 17.0% higher than the current stock price.

Risk

The epidemic has been repeated and the economic growth has slowed down.