1Q19, revenue fell 0.89% year-on-year, profit increased 3.65% year-on-year, performance lower than expected
Yue Expressway released its quarterly report in 2019: 1) operating income decreased by 0.89% to 736 million yuan compared with the same period last year, while net profit increased by 3.65% to 354 million yuan; 2) the performance was slightly lower than expected (our profit forecast was 373 million yuan), mainly because the impact of road network diversion was higher than expected. The profit growth mainly comes from the increase of investment income and the decrease of financial expenses. We estimate that the EPS for 2019-2021 will be 0.69, 0.76, 0.84 yuan, and adjust the target price to 9.60-10.10 yuan, maintaining the "overweight" rating.
Affected by the diversion of the road network, the income dropped slightly compared with the same period last year.
1Q19, business income decreased by 0.89% compared with the same period last year, mainly affected by the diversion of the road network. Among them, 1) the main line of Foshan Ring Road is opened to traffic, and its traffic restrictions on goods vehicles are no longer restricted, diverting part of the traffic flow of Fokai Expressway; 2) the Humen Bridge imposed traffic restrictions on trucks of more than 10 tons from March 8 to April 2, and the abolition of tolls on the Zhuhai spur Line since June 15, 2018, reducing the toll income of the Guangzhou-Zhuhai East Expressway; 3) benefiting from the natural increase in traffic flow, the toll income of the Guangzhou-Foshan Expressway has increased.
Because ofGuoyuan SecuritiesThe performance has increased significantly, and the growth rate of the company's investment income is relatively high.
1Q19, the company's gross profit fell 2.30% compared with the same period last year, while operating profit and return net profit increased by 1.51% and 3.65% respectively. The difference between the growth rate of operating profit and gross profit is mainly due to the substantial increase in investment income and the slight decrease in financial expenses. 1Q19, the company's investment income increased by 16.84 million yuan over the same period last year, an increase of 16.35%, mainly due to the increase in investment income of participating companies. The company holds a 2.37% stake in Guoyuan Securities. Due to the rebound in 1Q19 market trading volume, Guoyuan Securities contributed 10 million yuan in investment income, an increase of 6.05 million yuan, or 153%, over the same period last year. Other participating companies contributed about 109 million yuan in investment income, an increase of 10.14 million yuan, or 10.23%, over the same period last year, mainly from the natural growth of traffic flow.
Looking forward to 2019, income is under pressure from road network diversion, and financial costs are expected to continue to decline.
According to the 2018 report, the company's business goal in 2019 is to complete the operating income of 3.222 billion yuan and control the operating cost within 1.422 billion yuan. In 2019, we expect: 1) the revenue side: the opening of Humen No.2 Bridge and the deck pavement of Hailong Bridge, which is expected to have a diversion impact on the traffic flow of Guangzhou-Zhuhai East Expressway; 2) the cost side: part of the extension project of Fokai South Section is opened to traffic, depreciation expenses are expected to increase slightly; 3) Financial expenses: the downward movement of market interest rates and debt replacement are expected to drive financial costs down. In addition, the company intends to sell the "Blue Channel" asset group. According to the company announcement (2019-01-23), the company expects the transaction to increase profits by about 17.3858 million yuan.
Adjust the target price to 9.60-10.10 yuan and maintain the "overweight" rating.
Due to the higher-than-expected impact of road network diversion, we adjusted the annual return net profit forecast on 2019-20-21 to 14.43 15.88 / 1.747 billion yuan (the previous 14.62 15.92 / 1.751 billion yuan). The Guangdong Expressway promised a dividend rate of 70 per cent from 2018 to 2020. We expect the annual dividend yield on 2019-20-21 to be 5.54%, 6.10%, 6.71% (assuming a dividend rate of 70%, based on the closing price of 20190426). We adjust the target price to 9.60-10.10 yuan (the previous time 9.70-10.30 yuan), based on: 1) still based on 14.7x2019PE (giving a 30% premium for the high dividend attribute on the basis of comparable company hub 11.3x2019PE), the estimated target price is 10.10 yuan; 2) based on WACC=7.95% (the previous 7.75%), the target price is estimated at 9.60 yuan. Maintain the "overweight" rating.
Risk hint: the Pearl River Delta economy has declined more than expected, and the growth rate of traffic flow is lower than expected.
(article Source: Huatai)
(HuataiShen Xiaofeng and Lin Xiaying are from Huatai)