Summary:

Maintain the target price and maintain the overweight rating. The traffic volume of Shanghai, Hangzhou and Ningbo in Zhejiang Province returned to exceed expectations in the third quarter, and we slightly raised our profit forecast to 25.9 pesos for 2020-22 net profit of RMB 3.84 trillion (compared with the previous forecast of RMB 2.41 trillion). Good corporate governance and strong recovery. In addition, the company announced the acquisition of the group's road property plan, reinvestment continues to try and break through.

We maintain the company's target price of HK $7.80 (excluding rights) and maintain the overweight rating.

Thanks to the coastal economic recovery, traffic has recovered strongly. In the third quarter, thanks to the economic recovery in the coastal areas after the epidemic, the company's traffic volume on many roads returned to more than 10% year-on-year growth. Due to factors such as ETC discount, the growth rate of toll revenue is slightly lower than that of traffic flow. The net profit of the highway business was about 930 million yuan, an increase of 9.4% over the same period last year. The company's highway business has recovered from the epidemic and free policy in the first half of the year, and the negative impact of the free policy is likely to be compensated.

The overall profit was higher than expected. In the third quarter, the profits of both the securities business and the financial companies that participated in the securities business grew by more than 20% compared with the same period last year. The overall net profit of the company was 1.98 billion yuan, an increase of 13.2% over the same period last year, exceeding our previous expectations.

Announce the plan to acquire the road property of the group and seek a breakthrough again. On November 11, the company announced that it plans to acquire 30% of Nanjing and Hangzhou and 100% of long Lilong.

The net profit of Nanjing-Hangzhou Company in 2019 is 720 million yuan. If the acquisition is successfully implemented, it is expected that Nanjing-Hangzhou Company will bring profits to the company. Although Longli Lilong project is difficult to bring direct profits to the company in the short term, the accumulated losses can be used for tax deduction and have no impact on the discounted value of the company.

Risk factors. The trend of securities and financial business is difficult to judge; the introduction of compensation policy is still uncertain; the extent of short-term dividends affected by the epidemic is not clear; the rhythm and results of reinvestment are uncertain.