Key points of investment

Affected by the epidemic and impairment charges, the company's 22-year performance was under pressure on the revenue side. Due to the impact of the epidemic on traffic traffic and the decline in construction service revenue, the company achieved operating revenue of 9.373 billion yuan in 2022, down 13.9% from the previous year after retroactive adjustments in 2021. Of these, 22Q4 achieved revenue of 2,726 billion yuan, a year-on-year decrease of 35.9%.

On the profit side, in terms of full-caliber profits, the impact of the pandemic was compounded by the impact of Lander Environmental Protection and Nanjing Wind Power impairment charges. In 2022, the net profit of the mother was 2,014 billion yuan, a year-on-year decrease of 22.9%. If we further exclude any financial impact (mainly profit and loss from the capital reduction of United Land), net profit of non-attributable parents was 1,226 billion yuan in 2022, a decrease of 47.4% over the previous year.

The toll road business is under short-term pressure. Concerning the subsequent return of traffic flow growth, the company's toll road revenue in 2022 reached 4.978 billion yuan, a year-on-year decrease of 15.52%. It was mainly affected by the decline in short-term demand for logistics and mass travel and the impact of road diversion after the opening of the outer ring phase II, which led to a year-on-year decline in the company's multi-route traffic. Among them, the 22Q4 truck toll reduction of 10% also had an impact on toll revenue. Considering that the company's regional advantage and empowerment led to a steady return to road travel in the Greater Bay Area, and the company's locomotive highway expansion project continued to advance, with the remaining two phases along the river The opening of road sections, etc. is expected to bring about medium- to long-term traffic growth.

The environmental protection business is expanding in an orderly manner

In terms of solid waste resource management business, revenue in 2022 decreased by -3.9% year on year to 946 million yuan. Among them, food waste disposal business revenue decreased by -35.9%, mainly due to a decline in construction revenue from Lande's environment-related projects, while revenue from the scrapping and comprehensive battery utilization business increased by 226.7%, mainly due to a sharp increase in Shenzhen-Shantai's Qiantai business. In 2022, the number of scrapped vehicles dismantled increased 45% year on year, and decommissioned power battery disposal increased more than 200% year on year.

In terms of the clean energy business, revenue in 2022 increased 13.3% year-on-year to 8.079 billion yuan, mainly contributing to the increase in the power generation capacity of the Mului project and the increase in newly acquired wind power projects such as Zhongwei Gantang and Yongcheng Energy. The company's total installed wind power capacity in 2022 reached 648 MW.

Looking ahead, we believe that the company will continue to cultivate solid waste recycling and clean energy segmentation, and achieve orderly business expansion in line with the general trend of national policies.

Attention is paid to shareholder returns. The high dividend ratio continues. The dividend income is still impressive. The company has maintained a stable dividend distribution policy for many years, promising that the annual dividend ratio from 2021-2023 will not be less than 55%. It is expected to distribute a cash dividend of 0.462 yuan/share in 2022, totaling about 1,008 billion yuan. The dividend ratio corresponding to the current stock price is about 5.5%. If the profit forecast and the 55% dividend ratio are calculated, the 2023 dividend rate is about 7.5%. Dividend earnings are still impressive.

Profit forecasting and valuation

We expect the company's net profit to the mother in 2023-2025 to be 2,757 billion yuan, 3,017 billion yuan, and 3.259 billion yuan respectively, corresponding to PE 7.3 times, 6.7 times, and 6.2 times, respectively. Considering the company's outstanding location advantage and strong business collaboration between its two main businesses, post-pandemic recovery is expected to bring flexibility. In addition, dividend promises highlight high dividend value and maintain an “increase in holdings” rating.

Risk warning: high-speed cargo renovation and expansion fell short of expectations; potential diversion impact on parallel road sections; environmental protection business performance fell short of expectations