It is proposed to raise no more than 6.5 billion yuan, mainly for the third phase of the construction of the Shenzhen Expressway in the outer ring, which is intended to issue A-shares to specific targets, raising funds of no more than 6.5 billion yuan for the third phase of the Shenzhen Outer Ring Expressway project (4.6 billion yuan) and repaying interest-bearing loans (1.9 billion yuan). The number of issues is not more than 30% of the total share capital. The starting price of the issue is which of the two: 1) 80% of the average price of the 20 trading days before the benchmark. 2) net assets per share (7.95 yuan in 22 annual report). As the fixed increase still needs to be considered by the shareholders' meeting, our model has not been reflected for the time being, and we only do the impact analysis of the preparation for the exam. For the time being, we maintain the forecast of net profit from homecoming in 2023-24-25, which is $2.72 billion, $2.73 billion, $2.80 billion. Based on the segment valuation method, the target price of 600548 CH/548 HK is given. The target price adjustment is mainly caused by interest rate fluctuations, exchange rate fluctuations and wind power PE fluctuations. Maintain "buy".

Financing is beneficial to consolidate the main business and improve the capital structure.

The company's asset-liability ratio reached 60.5% at the end of 22, higher than the average of 47.4% of the A-share highway sector. At the same time, the company's toll road and large environmental protection business are in a period of expansion, and the capital expenditure is still heavy in the future. investment projects include mechanical load reconstruction and expansion, participation in the company's Guangzhou-Shenzhen highway reconstruction and expansion, Lande environmental protection kitchen project, bright environment park and wind power operation and other projects. This issue will help to consolidate the main highway industry and control the scale of interest-bearing liabilities. Referring to the Shenzhen Expressway 2022 Annual report, the comprehensive borrowing cost is about 3.49%, the repayment of the loan is 1.9 billion yuan or the company's financial expenses are reduced by 66 million yuan per year, and the net profit is increased by about 50 million yuan per year.

The total investment IRR of the outer ring project reached 6.76%.

The outer ring highway, which spans seven administrative districts of Shenzhen, is an important east-west channel. The outer ring project is divided into three phases, the first phase (51km) and the second phase (9km) were completed and opened to traffic in 2020-12-29 and 2022-1-1 respectively, and only three phases (17km) have not been implemented. The investment of the first and second phase of the company is 6.5 billion yuan, the estimated investment of the third phase is 8.4 billion yuan, and the planned construction period is 2023-2028. The total charging period of the outer ring project is expected to be 25 years, and the overall total investment IRR of the project is 6.76%, which is at a reasonable level. After the completion of the outer ring highway, it will help to alleviate the east-west traffic pressure in the periphery of Shenzhen. The Shenzhen-Middle Corridor is expected to open in 2024 (Shenzhen Traffic), which may be of great benefit to the connected outer ring highway. According to the announcement of the company's investment in the outer ring project, the company predicts that the cumulative cash flow of operating activities will reach 28.7 billion yuan during the operation period of the outer ring project.

After the completion of the transaction, short-term net profit is less affected, EPS or diluted, DPS or diluted assume that the transaction is completed at the end of 23, we do the following sensitivity analysis. As the third phase of the outer ring does not produce benefits before completion, and the repayment of the loan only slightly reduces the financial cost, we expect the 23-year net profit to be less affected. Assuming that new shares are issued at the fixed cap, the company's total share capital will increase by 30%, and our current forecast of 23-year EPS (newly diluted) will decrease by 21%. The company's shareholder return plan for 2021-2023 mentions that the dividend ratio will not be less than 55%. Assuming that the dividend ratio in 23 is maintained at 55%, our current forecast for 23 will reduce DPS by 21%.

Risk hint: the growth rate of traffic flow is lower than expected, the progress of environmental protection projects and road property acquisitions is not as expected, the capital expenditure is higher than expected, and the charging standard is reduced.