3Q22 Traffic Circle ratio improvement support performance
From January to September, the company achieved a net profit of 2.941 billion yuan (down 26% from the same period last year), reaching 78% of our full-year expectations. The net profit of 1Q22/2Q22/3Q22 homing is RMB 1.085 billion / 501 million / 1.354 billion (down 11.8%, 61.0% and 7.2% compared with the same period last year). 3Q net profit improved compared with the previous year (mainly due to the recovery of traffic volume), but decreased compared with the same period last year (mainly due to the decline in net profit of securities business). Considering that the weak travel demand may continue and the national truck toll of 4Q22 will be reduced by 10%, we will reduce the net profit forecast of 2022max 2023Universe by 8.9% and 11.0% to RMB 3.455 billion / 4.423 billion / 5.174 billion (previous value: RMB 3.79 billion / 4.967 billion / 5277 million). We have lowered the target price by 11% to HK $7.10 (previous value: HK $7.98), which is still based on the segment valuation method, of which the toll road discount rate WACC is 7.69%. We expect the dividend yield for 2022 and 2023 to be 8.4%, 8.9% and 9.3% for 2024. Maintain a "buy" rating.
The profit of the securities business has declined due to the high base effect and the adjustment of the A-share market. We expect the net profit of the company's 3Q22 securities / bank / toll road and other businesses to decline by 40% / up 14% / 1% compared with the same period last year, and the net profit of the three businesses accounts for 13%, 11%, 76%. The company's 3Q22 securities investment income fell 53% to 297 million yuan from a high base (3Q21 income was 638 million yuan), mainly due to the sharp adjustment in 3Q22's A-share market and better market performance in the same period last year. The 3Q22 net profit of Shanghai Agricultural Commercial Bank, an associate of the company, has improved compared with the same period last year.
Month-on-month improvement in 3Q22 toll revenue
The company's 3Q22 toll revenue is up 32% from 2Q22, but is down about 2% from a year earlier (mainly because travel demand has not yet returned to 3Q21 levels). The change of road network and ETC discount policy also have a negative impact on toll revenue. Hangzhou-Shaotai Expressway has been fully opened to traffic since February 2022, which has a certain diversion impact on the traffic flow of the company's core sections (Shaoxing section of Hangzhou-Ningbo Expressway and Shangsan Expressway). Since January 2022, Zhajiasu Expressway has implemented a 15% ETC toll discount for trucks in Zhejiang Province, which also has a negative impact on tolls.
The company plans to issue a special plan to support assets.
The company intends to launch an asset support special plan (announced on September 19) to securitize the basic assets held by Shenjiahu Hangzhou Company and raise funds for the company's operation and development. According to the announcement, the company will transfer all the shares of Shenjia Huhang Company to the special asset support plan, with a cash cost estimated at not less than 2.943 billion yuan. According to the announcement, the company is expected to confirm that the estimated revenue based on the merger basis is about 1.935 billion yuan. The revenue / net profit of Shenjiahu Hangzhou Company in 2021 is RMB 784 million / 53 million yuan.
After the completion of the transaction, Shenjia Lake Hangzhou Company will no longer be merged in Zhejiang Shanghai, Hangzhou and Ningbo. Considering that the release is not yet complete, our model does not take this into account.
Risk tips: 1) the growth rate of traffic flow is slower than we expected; 2) the trading volume of A stock market is lower than we expected; 3) the fee standard is reduced beyond expectation.