The company announced its 2022 annual report: Guimu's net profit was 2.010 billion yuan, a year-on-year decrease of 22.9%. 1) Performance:

Revenue of 9.37 billion yuan was achieved in 2022, down 13.93% from the previous year. The main reasons were that ancillary toll roads were affected by a decline in short-term travel intentions and road diversion; the impact of the epidemic combined with Lander Environmental Protection and Nanjing Wind Power impairment charges. Guimu's net profit was 2.001 billion yuan, down 22.9% from the previous year; after deducting net profit of non-Gumo's net profit of 1.23 billion yuan, a decrease of 47.4% over the previous year. Of these, 22Q4 achieved revenue of 2.73 billion yuan, net profit returned to the mother was 0.1 million yuan, net profit of non-return to the mother was -40 million yuan, and net cash flow from operating activities was 782 million yuan. Note: In January 2022, Shenzhen Investment Control Infrastructure was included in the scope of the group merger according to the merger of enterprises under the same control, and the company made retroactive adjustments.

2) Profit margin: Gross profit margin in 2022 was 32.2%, -2.6 pts year over year; net interest rate returned to the mother was 21.5%, -2.5 pts year on year; net interest rate after deducting non-return to the mother was 13.1%, -8.3 pts year on year. 3) Investment income: $1.53 billion in 2022, up 58.5% year on year. This is mainly due to the fact that Joint Land completed capital reduction procedures, and the premium portion enjoyed by the company when other shareholders unilaterally increased their capital in the previous year was transferred from capital reserve to investment income, thus increasing investment income by 921 million yuan. 4) Dividend policy: The company implements an active cash dividend policy and plans to distribute a cash dividend of 0.462 yuan/share. The dividend ratio is 55.1%, and the corresponding dividend rate of the current stock price is 5.4%.

Toll roads: 22Q4 implemented a 10% reduction in truck tolls, leading to a decline in revenue. The toll road business achieved a total revenue of 4.98 billion yuan in 2022, a year-on-year decrease of 15.5%, accounting for 53.1%, and a gross profit margin of 43.75%. Toll road business revenue declined due to falling demand for road traffic and the influence of the company's implementation of a 10% reduction in truck tolls in the fourth quarter. 1) Changes in road toll revenue from major controlling road production companies in 2022: Affected by the domestic epidemic, the Outer Ring Project/Qinglian Expressway/East Airload Section/West Airfield Section/Shuiguan Expressway/Yichang Expressway/Wuhuang Expressway/Changsha Ring Road/Meiguan Expressway/Longda Expressway were +3.65%, -29.73%, -13.88%, -15.90%, -13.44%, -24.31%, -20.26%, -16.86%, -9.78%, -9.78%, respectively. 2) Project expansion: In 2022, the company continued to consolidate and enhance its main toll road business, completed the acquisition of 71.83% of the Hong Kong-listed company Bay Area Development's controlling interest. The Group added the Guangzhou-Shenzhen Expressway and the Guangzhou-Zhuhai-West Expressway to the group's toll road business layout, adding 105 kilometers of equity toll mileage.

Environmental protection sector: The strategic layout of the industry is getting better. The environmental protection sector achieved a total revenue of 1,757 billion yuan in 2022, -3% year on year. 1) Clean energy: As of 2022, the total installed capacity of wind power projects invested and operated by the company reached 648MW, and the clean energy business revenue reached 8.1 billion yuan, +13.3% year on year, accounting for 8.62% of total revenue. The main reason for the 53.3% revenue increase was the increase in revenue from wind power projects such as Zhongwei Gantang and Yongcheng Energy Assistance. 2) Solid waste recycling: In 2022, the company disposed of 957,000 tons of organic waste; food waste treatment business revenue reached 550 million yuan, -35.9% year on year, accounting for 5.9% of total revenue. The main reason for the decline in revenue was a decrease in construction revenue related to the Lande Environmental Food Waste Treatment Project; vehicle scrapping and comprehensive battery utilization achieved revenue of 3.9 billion yuan, +226.7% over the same period last year, accounting for 4.2% of total revenue. The main reason for the large increase in revenue was the growth of Shenzhen-Shantai Dry's business.

Investment suggestions: 1) Based on our judgment on the pace of recovery, we slightly adjusted the company's 2023-24 profit forecast to achieve net profit of 24.6 and 27.4 (the original forecast was 2,777 million yuan, 2.97 billion yuan), and introduced the 2025 forecast of net profit to the mother of 2.96 billion yuan, corresponding to the 2023-2025 EPS of 113, 1.26 and 1.36 yuan respectively, and PE by 800, 7, 6 times, respectively. 2) Referring to the company's average PE value of 9.6 times in the past five years, we gave an estimated profit of 9.6 times PE in 2023, corresponding to the one-year target price of 10.9 yuan. We expect a 28% increase from the current price. We continue to be optimistic about the development of the company's two main businesses, continue to enhance the value of the industrial chain, and maintain the “recommended” rating.

Risk warning: The decline in traffic due to the impact of the epidemic has exceeded expectations, environmental protection projects have fallen short of expectations, etc.