Incidents:
In 2022, the company achieved annual revenue of 5.206 billion yuan, an increase of 32.78% over the previous year, and the net profit of its mother was 1,445 million yuan, a decrease of 4.57% over the previous year. The first to fourth quarters of 2022 achieved revenue of 996/18.50/1,169/1,221 million respectively, and net profit of 406/2.60/507/07/272 million was achieved. In 2022, the company plans to distribute a cash dividend of 0.55 yuan per share, with a corresponding dividend rate of 6.16%. A total cash dividend of 912 million yuan will be distributed, with a dividend rate of 63.13%.
The construction service revenue of 1,417 million yuan for the Xuanguang Expressway renovation and expansion PPP project confirmed year-on-year changes of 32.78% and 86.94% respectively in 2022. The main reason was that the company confirmed the construction service revenue/cost of the Xuanguang Expressway renovation and expansion PPP project of 1,417 million yuan according to the zero gross profit law. After excluding this factor, the company's overall revenue fell 3.37% year-on-year.
The company's toll road business revenue fell 3.78% year on year
The company's toll road business achieved revenue of 3.720 billion yuan in 2022, a year-on-year decrease of 3.78%, mainly affected by the epidemic and toll reduction policies. Hening Expressway, the main road producer, achieved revenue of 1,197 million yuan, a year-on-year decrease of 0.21%. The smaller decline was mainly due to the opening of the entire Chuhe Bridge line to traffic at the end of June 2022, which favoured traffic growth in Hening. The Gaojie Expressway and the Yuewu Expressway both bucked the trend and achieved positive growth in terms of traffic flow and toll revenue. This was mainly due to road section repairs and the diversion of vehicles passing through the Gaojie Expressway to Gaojie Expressway traffic, and the return of workers returning to their hometowns during the Spring Festival travel season to increase bus traffic.
It is proposed to acquire Liuwu Expressway to further expand the scale of the main business
On April 3, 2023, the company announced that it intends to acquire 100% of the shares of Anhui Liuwu Expressway Co., Ltd. held by Anhui Transportation Holding Group Co., Ltd. by issuing shares and paying cash. The Liuwu Expressway is an important part of the Shanghai-Rong Expressway. The toll mileage is 92.7 kilometers, and the toll period is until the end of 2039. The Liuwu Expressway is connected to the Heliuye Expressway, and the Heliuye “four to eight” project was completed in December 2022. It is expected to boost traffic on the Liuwu Expressway. The acquisition of the Liuwu Expressway will help the company lay out the road network in western Anhui, expand the scale of the company's road production operations and effectively extend the toll period, further enhancing the competitiveness of the company's main business.
Profit Forecasts, Valuations, and Ratings
The road production under the company is all the main national highway crossing the Anhui region. With the elimination of the impact of the epidemic, traffic traffic has shown a significant recovery trend, and the company's performance may usher in an upward inflection point. On December 30, 2022, the pilot section of the Linjian Expressway (Qianqiuguan Tunnel to the submarine hub section) was officially opened to traffic. The Ningguo-Qianqiuguan section of the Ning-Xuanhang Expressway (Anhui Expressway S05) guillotine was successfully connected. I am optimistic about the traffic boosting effect brought about by the road network effect after Ning Xuanhang was completed. We expect the company's revenue for 2023-2025 to be 5,562/57.39/4.604 billion yuan respectively (2023-2024 original value was 7,063/7.240 billion yuan, mainly due to adjustments to PPP project construction revenue forecasts); Guimu's net profit was 1,700/1768/1,856 billion yuan respectively (original value of 2023-2024 was 1,725/1,820 billion yuan), and EPS was 1.03/1.07/1.12 yuan per share, respectively. The target price was raised to 10.30 yuan (corresponding to 10X PE in 2023) and raised to the “buy” rating.
Risk warning: Traffic growth rate falls short of expectations; charging policy changes.