Main points of the report
Event description
In the first half of 2016, Hyundai Investment's operating income increased by 40.34% year-on-year to 3.9 billion, gross profit margin decreased by 4.60 percentage points year-on-year to 19.77%, attributable net profit increased by 43.29% year-on-year to 342 million, and the final EPS was 0.338 yuan per share. Of this total, revenue in the second quarter rose 69.88 per cent to 2.532 billion from a year earlier, gross profit fell 5.99 percentage points to 18.17 per cent, and net profit attributable to the same period increased by 50.69 per cent to 220 million, corresponding to an EPS of 0.218 yuan.
Event comment
The impact of Changtan transformation is fading, and the overhaul of Tan Shao will benefit in the second half of the year. In the first half of 2016, the company's revenue increased by 40.34% year-on-year to 3.9 billion yuan, of which the revenue of the main road toll business reached 1.075 billion, which was basically the same as the same period last year. Since November 2015, the Lito section of Changtan Expressway has been reformed, and the traffic flow of Changtan Expressway and Tanshan Expressway has been restrained to a certain extent. As a result, the revenue of Changyong and Changtan Expressway fell 7.77% in the first half of the year compared with the same period last year, while that of Tanzhou Expressway increased slightly by 1.93%. The transformation of the Lituo section was completed in January, and the follow-up traffic flow is expected to increase gradually. At the same time, due to the half-closure construction of the parallel Tan-Shao Expressway in May-November, the bypass vehicles will thicken the traffic flow of Tanghe. From June to July, the daily average traffic volume of Tan-Shan Expressway increased by 16.8% and 18.8% respectively compared with the same period last year. Xuhuai Expressway experienced high growth last year, and the growth rate will gradually slow down. Xuhuai Expressway achieved 16.78% revenue growth in the first half of the year.
The cost of the main business of the highway has decreased and the gross profit margin has increased. Due to the national inspection last year, the company completed some preventive maintenance, the operating cost base is on the high side. In the first half of this year, the operating cost of the main highway industry fell by about 10% compared with the same period last year, and the gross profit margin increased by 4.89% to 58.27%. Finally, the gross profit of the main highway industry increased by 9.04% to 626 million.
The "one main body and three wings" has made steady progress. In the first half of the year, the company participated in the investment in the establishment of two agricultural and commercial banks; the holding subsidiary Hyundai Wealth Management set up a financial leasing company; and the wholly-owned grandson Company acquired a 51% stake in Deyuan Environmental Protection in Honghe Prefecture with 30.2 million yuan. Wholly-owned subsidiary Modern Environmental Technology Investment and Everbright International Joint Venture Investment Construction of Municipal solid waste Incineration Power Generation Project Company. The diversified development strategy is advancing steadily, and the company's performance flexibility will be further improved in the future.
Maintain a "buy" rating. Taking into account the continuous recovery of the company's main highway traffic flow and the continued development of auxiliary industries to provide future space and flexibility, we estimate that the company's EPS in 2016-2018 will be 0.67 yuan, 0.77 yuan and 0.85 yuan respectively, maintaining a "buy" rating.
Risk hint: the income level of Changyong Changtan section has declined again; large losses in bulk trade
