Main points of investment
Event: Guangdong Expressway A released its mid-2022 report that in the first half of 2022, the company achieved operating income of 2.057 billion yuan, down 17.32% from the same period last year; realized net profit of 774 million yuan, down 8.84% from the same period last year; and realized net profit of 743 million yuan, down 11.82% from the same period last year, with a basic EPS of 0.37 yuan.
Comments:
The epidemic situation in the province superimposed Guangfo Expressway to stop charging, business income and performance have declined. 2022H1's operating income was 2.057 billion yuan, down 17.32% from the same period last year, and its net profit was 774 million yuan, down 8.84% from the same period last year. The decline in business income over the same period last year was due to: 1) the expiration of the charging period of Guang-Fo Expressway in March 2022; and 2) the epidemic in Guangdong Province from January to April 2022, which was affected by the epidemic prevention and control measures and superimposed on extreme weather. The traffic volume of each section of the holding company declined in varying degrees, and the traffic flow of Guanghui Expressway and Beijing-Zhuhai Expressway was greatly affected, and the toll income decreased compared with the same period last year.
The operating cost of 2022H1 Company was 696 million yuan, down 21.70% from the same period last year. This is due to the fact that the fee period for the reconstruction and expansion project from Sanbao to Shuikou of Fokai Expressway was approved in June 2021, and the reduction of toll income (calculated in terms of workload method) reduced the depreciation cost of road property. 2022H1 achieved an investment income of 162 million yuan, of which the company obtained an investment income of 14 million yuan from the one-time transfer of all shares of Yue Hi-Tech, which decreased by 13.50% compared with the same period last year after deducting the investment income from the disposal of subsidiaries. Due to the influence of the epidemic in Guangdong Province, the toll income of participating in road property declined somewhat, of which the toll income of Jiangzhong Expressway declined the most, falling 24.39% compared with the same period last year. With the exception of Guang Le Expressway, the toll income of all participating road property fell by more than 8% compared with the same period last year.
With the improvement of the epidemic situation, the flow of cars produced on the holding road has warmed up. In the first half of 2022, the toll income of the four roads controlled by the company reached 2.02 billion yuan, down 17.25 percent from the same period last year, of which Guanghui highway tolls accounted for the highest proportion, accounting for 880 million yuan, accounting for 42.79 percent of the total revenue. Guangfo Expressway stopped charging in March 2022, contributing the least toll income, accounting for 3.15% of the total revenue, down 69.88% from the same period last year. Affected by the epidemic in Guangdong Province from January to April 2022, the toll income of Guanghui Expressway and Beijing-Zhuhai Expressway decreased by 11.22% and 20.00% respectively compared with the same period last year. At the same time, since May, with the effective control of the epidemic situation and the superimposed summer travel demand, the traffic flow of all road sections has warmed up. With the relief of the epidemic and the gradual recovery of traffic flow, the company's performance is expected to pick up.
Investment strategy: the epidemic situation is gradually alleviated, the superimposed reconstruction and expansion is completed to strengthen the road network effect, and the profit of the expressway controlled by the company is expected to maintain steady growth in the future. At the same time, good corporate governance, pay attention to shareholder returns, the company promised 2021-2023 dividend rate of not less than 70%, is a stable performance and high dividend varieties, high defense. We maintain the profit forecast. It is estimated that from 2022 to 2024, the net profit of the company will be 1.604 billion yuan, 1.748 billion yuan and 1.911 billion yuan, and the EPS will be 0.77 yuan, 0.84 yuan and 0.91 yuan, corresponding to the closing price of 7.29 yuan on August 26, 2022, and the PE will be 9.5x, 8.7x and 8.0x, respectively. Assuming that the dividend yield is maintained at 70%, the dividend yield will be 7.4%, 8.0% and 8.8%, maintaining the "prudent overweight" rating.
Risk Tips:
(1) the economic downturn leads to a decline in traffic flow: the economic downturn may affect people's willingness to travel and have a greater impact on traffic flow, thus affecting the company's business income. the progress of performance recovery may be lower than expected; (2) the change of toll policy: the government has certain guidance on highway tolls, and the change of toll policy has a great impact on the toll income of the company's holding road property and affects the company's future profits. (3) reinvestment risk: the rate of return of other business sectors reinvested by the company may be lower than expected, affecting the company's earnings.