Key points of investment

Incident: Shenzhen Express released its semi-annual report for 2023: in the first half of 2023, the company achieved operating income of 4.125 billion yuan, an increase of 0.75% over the previous year (after adjustment); net profit of 929 million yuan, an increase of 9.49% over the previous year (after adjustment); net profit of 805 million yuan after deducting non-return net profit of 805 million yuan, an increase of 5.99% over the previous year. Among them, in the second quarter of 2023, the company achieved operating income of 2,221 million yuan, a year-on-year decrease of 4.31%; net profit of 487 million yuan, an increase of 11.68% over the previous year; net profit after deducting non-return net profit of 367 million yuan, an increase of 6.59% over the previous year. The increase in revenue in the first half of 2023 was mainly due to the combined effects of revenue growth due to a restorative increase in traffic traffic on ancillary toll roads, the handover of the Wuhuang Expressway franchise to government departments and commissioned construction and management projects in December of the previous year, and a year-on-year decline in revenue recognition. After deducting the impact of the Wuhuang Expressway in the same period last year, the company's revenue increased 5.80% year on year, of which toll revenue increased 17.34% year on year.

Comment:

Due to the spread of the impact of the epidemic and the low base for the same period last year, the first half of 2023 recorded a significant year-on-year increase in traffic and toll revenue: as of the end of June 2023, the company operated and invested in 16 road projects, with a controlling interest mileage of about 643 kilometers. It is mainly located in Shenzhen, the Guangdong-Hong Kong-Macao Greater Bay Area and economically developed regions. It has a good location advantage, and the scale and profitability of road production are at the forefront of the industry.

In the first half of 2023, the company achieved toll revenue of 2,599 billion yuan, accounting for 63.01% of the company's total revenue, an increase of 7.83% over the previous year. This was mainly due to the combined effects of the restorative increase in traffic traffic on affiliated toll roads and the decrease in revenue from the Wuhuang Expressway franchise due in December of the previous year. Excluding the impact of the Wuhuang Expressway during the same period last year, compared with the same caliber, the company's affiliated toll road toll revenue increased 17.34% year-on-year. Among them, the Outer Ring Expressway achieved revenue of 568 million yuan, an increase of 29% over the previous year; the eastern section of Gehe achieved revenue of 329 million yuan, an increase of 9.33% over the previous year; and the western section of Gehe achieved revenue of 264 million yuan, an increase of 19.85% over the previous year. In terms of gross profit, the company's toll roads achieved gross profit of 1,379 million yuan in the first half of 2023, accounting for 83.88% of the company's total gross profit, an increase of 19.98% over the previous year.

Risk warning: Traffic traffic has declined due to economic downturn, etc., the industry has been affected by changes in control policies, environmental protection development has fallen short of expectations, etc.