3Q net profit is higher than expected, recording a large amount of non-recurrent income
According to the restated caliber, the income of Shenzhen Expressway from July to September is 2.55 billion yuan (+ 5.5% compared with the same period last year), and the net profit of returning mother is 1.16 billion yuan (+ 62.5% compared with the same period last year), which is better than our expectation (907 million yuan;). Shenzhen Expressway reduced the capital of the United Land Company, resulting in an investment income of 920 million yuan (a premium for the capital increase of other shareholders in previous years), which made a great contribution to the net profit of 3Q. 3Q deduction non-net profit decreased by 25% compared with the same period last year, mainly because travel demand was disturbed by external factors. Considering that the delivery time of the third phase of Meilinguan may be delayed, the weak travel demand may continue, and the toll of trucks on the Q4 highway will be reduced by 10%, we will reduce the net profit forecast of 2022, 2023, and 2024 by 15.4, 15.7 and 5.3% to 24.1, 2.44 and 2.85 billion yuan. Based on the segment valuation method, we maintain a "buy" rating with a target price of RMB10.75 (previous value: RMB10.77) for 600548 CH and HK $9.76 (previous value: HK $10.50) for 548 HK.
Q3 toll month-on-month improvement, but still disturbed by the external environment
The company's Q3 revenue / operating cost / gross profit increased by 6% over the same period last year (not restated), mainly due to wind power generation and other off-road businesses contributed to the increase. The company's Q3 toll / organic waste disposal / wind power revenue reached 1.42 billion yuan, accounting for 56% of the total revenue. Among them, Q3 toll revenue increased by 12% compared with Q2, but decreased by 8% compared with the same period last year, and is still disturbed by the external environment. The core road production of the company is located in the economically prosperous Shenzhen and its surrounding areas, with a relatively high volume of passenger cars. Residents' willingness to travel is declining, which is a drag on the performance of traffic flow. Q3 wind power revenue increased 57% year-on-year, mainly due to the acquisition of Yongcheng Energy in September 2021 and Zhongwei Gantang in December, and increased revenue from the project. The company's Q3 solid waste treatment (including organic waste treatment) revenue may continue the steady growth trend in the first half of the year.
The core road production is proposed to be renovated and expanded, and the Shenzhen-Middle Corridor is opened or there is a drainage effect. The company plans to carry out the reconstruction and expansion of the machine-load highway of the core road production (10 prime 1 announcement), and the existing six lanes will be upgraded to three-dimensional "8x8" lanes. The total investment of the reconstruction and expansion project is 43.3 billion yuan, of which the company's capital contribution is 13 billion yuan, the government arranges investment subsidy of 15 billion yuan during the construction period, and the Shenzhen special investment investment is 15.3 billion yuan. The amount of Shenzhen high-speed investment will be invested in stages from 2023 to 2027, with heavy capital expenditure. We believe that the prospect of the machine-load highway is good, which is a scarce east-west channel in Shenzhen, and the current traffic flow has been basically saturated. The Shenzhen-Middle Corridor connected to the machine-load highway is expected to be completed by the end of 2024, when the traffic demand is expected to further increase. As the reconstruction and expansion still needs the approval of the shareholders' meeting, our model has not reflected this matter yet.
The short-term impact of reconstruction and expansion construction is controllable, and the long-term prospect is good.
During the reconstruction and expansion of the machine-load highway, due to the decline of traffic capacity, the traffic flow of the project may be diverted slightly, and the financial cost may rise, but the overall impact can be controlled. However, after the completion of the project, the toll period of the machine-load highway is expected to be extended; due to the increase in the number of lanes, congestion relief, traffic volume may rise sharply.
Risk hint: the growth rate of traffic flow is lower than expected, the progress of environmental protection projects and road property acquisitions is not as expected, the capital expenditure is higher than expected, and the charging standard is reduced.