Forecast profit growth of 11% year-on-year
Guangdong Expressway released its 2018 results KuaiBao, with a preliminary accounting of 3.22 billion yuan in operating income, + 4% year-on-year, and 1.68 billion yuan in net profit, + 11% in the same period last year.
Among them, the deduction of non-net profit increased by 10% compared with the same period last year, which is in line with our expectations, mainly due to the steady growth of income brought about by the natural growth of the flow of holding road cars. The non-recurrent income was 280 million yuan (an increase of 17% over the high base of 240 million yuan in 2017), of which 4Q recognized 240 million yuan, mainly due to the investment loss caused by the cancellation of Fokai Company, resulting in an one-time tax benefit.
Pay attention to the main points
The endogenous growth of road production is steady. The passenger traffic of Guangdong Expressway accounts for nearly 70%, and the traffic flow is relatively less affected by the economy (of which the traffic volume of Guangzhou, Zhudong, 2008 and Yuedong increased by 3% and 5% compared with the same period last year).
We estimate the company's existing road production revenue in 2018-20 (year-on-year + 4% Universe 4% Universe 5%) and gross profit (year-on-year + 7% Universe 3% / + 4%).
The reconstruction and expansion of Fokai is about to bring about an increase in profits. The reconstruction and expansion of the southern section of Fokai Expressway adopts the method of construction and opening at the same time, and the common section of Jiangluo Expressway was completed in 2016. At present, the construction is smooth, the remaining mileage has been opened to traffic one after another, and all reconstruction and expansion projects may be completed as early as 2020, which is expected to accelerate the overall profit growth of the company.
In the future, it may focus more on the main highway industry. The company's current highway toll business contributes 97% of the net profit, of which the holding section Guangzhu / Fokai / Guangfo contributes 74% of the net profit. We believe that under the influence of "one participation, one control", the company may pay more attention to the development of the main highway industry in the future. The mileage of road property managed by the company accounts for only 4.5% of Guangdong Exchange Group. We think that in the future, the company is expected to obtain road products with mature traffic flow and high profitability from the parent company.
The dividend is substantial. The company's shareholder return plan promises no less than 70 per cent of dividends from 2018 to 2020 without major investments. According to the company's announcement, the return on home net profit in 2018 will reach 6.5%, while we expect the dividend yield in 2019 to be 6.0% and 6.4% in 2020.
Valuation and suggestion
Based on the tax benefit of 4Q brought by the cancellation of Fokai Company, we raised the 2018 EPS forecast by 14% to 0.80 yuan (+ 11%, + 10%), maintained the 2019 forecast of 0.74 yuan (- 7%, + 6%), and introduced the 2020 EPS forecast of 0.79 yuan (+ 7%). The current share price corresponds to 11.7 times 2019 p / e. We maintain the recommended rating and raise the target price by 10% to 10.22 yuan, corresponding to 13.9 times 2019 price-to-earnings ratio and 18% upside space, based on the Fokai reconstruction and expansion progress update and valuation switch.
Risk
The policy of the highway industry has changed, and the surrounding new road network has been diverted.