1. Incident: The company announced road production revenue for January-October 2009: From January to October 2009, the company's road and bridge assets obtained toll revenue of 1,652 million yuan, an increase of 10.52% over the previous year, of which toll revenue in October was 186.5 million yuan, an increase of 20.5% over the previous year. In the third quarter, the company achieved net profit of 163 million yuan and earnings per share of 0.076 yuan; in January-September, the company achieved cumulative total operating income of 1,507 billion yuan, a year-on-year decrease of 8.96%; and realized net profit attributable to owners of the parent company of 404 million yuan, with earnings per share of 0.189 yuan, an increase of 32.17% over the previous year. 2. Our analysis and judgment (1) Toll revenue from major road and bridge assets accelerated after September. According to the January-October toll revenue data of the company's road and bridge assets, after entering September, toll revenue growth rates for the Zhengzhou Yellow River Bridge, Zheng Luo Expressway and Luozhu Expressway located on the Beijing-Hong Kong-Macao artery suddenly increased. Among them, the average growth rate of the Zheng Luo Expressway from January to August was 4.26, while the average growth rate for September and 10 was 15% (Figure 1); the growth rates of Luozhu Expressway during the same period were 4.6% and 20%, respectively (Figure 2); the revenue growth rate of the Zhengzhou Yellow River Bridge during the same period was 9.5% and 32.6%, respectively (Figure 3). The Beijing-Hong Kong-Macau Expressway mainly uses “transit” vehicles for long-distance transportation from south to north across provinces and cities across the country, and changes in traffic flow can also be used as a pioneering indicator for observing domestic macroeconomic fluctuations. Traffic on the Henan section of the Beijing-Hong Kong-Macao Expressway has been growing at an accelerated pace since September, confirming from one side that China's economy has entered the recovery phase. (2) Excessive capital expenditure of 23.3 billion yuan suppresses short- and medium-term profitability. The company's current construction, proposed, and unsettled projects and foreign investment totaled 23.307.7 billion yuan (see Table 1 for specific projects). Of these, 2010 to 2012 was an intensive phase of the company's capital expenditure, while 2012 and 2014 will be the peak of large-scale carry-over fixed assets for engineering projects, converting 7.8 billion yuan and nearly 6 billion yuan of projects under construction into fixed assets and intangible assets, respectively. The expressway projects invested by the company have the characteristics of a huge one-time investment amount and a long payback period; secondly, to build and expand roads, it is also necessary to go through a traffic volume cultivation period of about 3 to 5 years before they can reach normal traffic volume levels. Newly built highways in the non-trunk line section have even longer traffic volume cultivation stages. The company uses a workload method for accounting and depreciation of road and bridge assets. Although this can reduce the cost burden at the initial stage of use of road and bridge assets to a certain extent, depreciation, amortization, and financial expenses caused by huge long-term capital expenses in the short term will surely put heavy pressure on the company's short- to medium-term profit and performance growth. (3) Diversion issues that cannot be ignored. The Anyang to Xinyang First Class Highway (Anxin Expressway) has been approved by the Henan Provincial Development and Reform Commission for the construction of the Anyang to Xinyang First Class Highway Luohejing and Zhumadian border projects. The planned construction mileage for the Luohe section and the Zhumadian section of the Anxin Expressway is about 50 kilometers and 110 kilometers, respectively. It is planned to build 3 toll gates according to the two-way four-lane first-class highway standard with a design speed of 100 kilometers per hour. The remaining Anxin Level 1 highway sections associated with parallel connections to the company's roads and bridges include Xuchang, Zhengzhou, and Xinxiang sections, which are still undergoing preliminary verification work, and have yet to obtain project approval. The Anxin Expressway is parallel to the company's main road production. The road level is close. According to the first-class road toll, the toll standard may be lower than the company's road production. Therefore, the completion and opening of the Anxin Expressway will cause serious diversion of the company's Luozhu Expressway and the Zhengluo Expressway. In particular, the diversion impact on short- and medium-distance vehicles along the route will be more serious. Up to now, construction on either of these projects has not started. Assuming that the Luohe section and the Zhumadian section of the Anxin Expressway start in 2010, they will not be completed and opened to traffic until after 2013 at the earliest, and it is estimated that the entire Anxin Expressway will be opened to traffic after 2013. It is expected that the impact of the Anxin Expressway on the diversion of the company's road products will gradually become significant after 2013. (4) Positive factors worth looking forward to. Although the company faces uncertainties such as huge long-term capital expenditure and Anxin's rapid diversion, there are also some positive factors worth looking forward to. One advantage is that the Xinxiang-Zhengzhou Expressway was injected into listed companies. “The Henan Provincial Transportation Department issued a “Letter of Commitment” on May 18, 2006. The content is as follows: The Henan Provincial Transportation Department undertakes, within its scope of power, without conflicting with laws and regulations: 1), promises that the Beijing-Zhuhai National Highway main line Xinxiang to Zhengzhou Expressway transfer issues after the project is completed and settled, according to relevant national regulations, our department will actively study related matters and fulfill the original promise to Henan Zhongyuan Expressway Co., Ltd. (“Zhongyuan Expressway” for short): The Xinxiang-Zhengzhou Expressway is an integral part of the main Beijing-Zhuhai National Highway, in accordance with relevant national regulations. The transfer is subject to approval by the Ministry of Transport. Our department will actively study related matters after the trial operation period is over and completion accounts are completed.” The second favorable factor is that the provincial transportation department promised to buy or replace the “Yongbohuai Expressway.” The Henan Provincial Transportation Department issued a “Letter of Commitment” on May 18, 2006: “After completing the final settlement of the Shangqiu section of the Yongbohuai Expressway invested and built by the Central Plains Expressway, our department will actively coordinate the acquisition of the relevant units or replace the assets of the Shangqiu section of the Yongbohuai Expressway.” The above two promises are positive factors worth looking forward to, but there are still uncertainties about the specific implementation time and sale price. 3. Investment advice: The performance forecast shows that the company's EPS for 2009 to 2011 was 0.276, 0.294, and 0.314 yuan, respectively. During the reporting period (2009-11-27), the company's secondary market closing price was 4.58 yuan, and the dynamic price-earnings ratios were 16.6, 15.6, and 14.6 times, respectively. The investment advice is “neutral.”