In the next three years, Guangfo and Fokai Expressway will face expansion, and the main business income will be negatively affected. The expansion project of Guangfo Expressway is mainly concentrated in 2008. As the expanded road already has six lanes, it will not have a great impact on vehicle speed, and the traffic volume of Guangzhou-Foshan highway is expected to drop by about 10% in 2008. Preparatory work is now under way for the expansion of Fokai Expressway, which is expected to be carried out in the second half of 2008. The existing Fokai Expressway has four lanes, so the use of semi-enclosed construction in the middle and later stages of the expansion will have a greater impact on traffic flow. It is expected that the traffic flow of Fokai Expressway will be reduced by about 30% in 2009.

Shares in the rapid growth of road production, smooth performance in the next three years due to the road network effect and the rapid economic growth of the Pearl River Delta region, Guangdong Expressway shares in the road production has entered a period of rapid growth. In 2007, the traffic volume growth rates of Maozhang Expressway, Jiangzhong Expressway, Guanghui Expressway, Huiyan Expressway, Beijing-Zhuhai Expressway and Yuezhao Expressway are all maintained at about 20%, but Maozhan Expressway and Jiangzhong Expressway will also make a slight loss. It is expected that the road property owned by Yue Expressway in 2008 will be fully profitable.

In the next three years, the pace of epitaxial expansion of Guangdong Expressway will be significantly accelerated with the appointment of the new management, the pace of epitaxial expansion of the company will be significantly accelerated. The newly established project department of the company is mainly responsible for the search and acquisition of road products. Yue Expressway has announced the acquisition of Kangda and Gankang Expressway, and it is expected that the company will make some moves in the acquisition of road products next year.

Investment suggestion: we estimate that the EPS of Guangdong Expressway in 2007 and 2008 is 0.43 yuan and 0.45 yuan respectively. According to the PE of 20x, the target price is 9 yuan. If we take into account the performance growth expectations brought about by the epitaxial expansion of the Guangdong Expressway, we give the Guangdong Expressway B "buy" rating.