Incidents:
The company released its semi-annual report for 2023. In the first half of 2023, the company achieved revenue of 2,340 million yuan, an increase of 13.76% over the previous year; realized net profit of 886 million yuan, an increase of 14.46% over the previous year; and achieved net profit of 914 million yuan after deducting non-return net profit of 914 million yuan, an increase of 22.97% over the previous year.
The traffic volume of the holding road production increased by more than 15% year on year, toll revenue increased 14.41% year on year. In 2023 H1, the company's toll road business achieved revenue of 2,311 million yuan, an increase of 14.41% year on year. Excluding the impact of the Guangzhou-Foshan Expressway in the same period in 2022, the year-on-year increase was 18.20%. Among them, traffic on the Fokai Expressway/Guangzhou-East Expressway/Guanghui Expressway increased 17.09%/27.86%/20.98%, respectively, and achieved toll revenue of 734 million yuan/558 million yuan/1,018 million yuan, respectively, with a year-on-year increase of 15.28%/27.64%/15.61%.
Toll revenue from the Huiyan Expressway, Guangzhao Expressway, and Gankang Expressway all achieved a year-on-year increase of more than 10%, driving the company's investment income to increase 11.73% year-on-year in the first half of the year.
Currently, the Guangzhou-Zhuhai-East Expressway is undergoing renovation and expansion work. 468 million yuan was invested in the first half of 2023. The project progress is about 7.43%. The impact on traffic in 2023 is expected to be relatively limited.
The cost management ability was excellent. The gross margin of road production remained at a high level in 2023 H1. The operating costs of the company's holdings of the Lushan Fokai Expressway/Guangzhu-East Expressway/Guangzhou-East Expressway/Guanghui Expressway changed by -2.79%/11.77%/20.26%, respectively. The gross margin was 67.14%/71.15%/68.16%, respectively. The year-on-year change was 6.11/4.09/-1.23 percentage points, and the gross profit margin of road production remained at a high level.
The company maintains a high dividend policy, and the dividend rate has a clear advantage
According to the company's “Shareholder Return Plan for the Next Three Years (2021-2023)”, the company's dividend rate will remain at least 70% in 2023. Using the closing price on August 28 as a benchmark, it is estimated that the company's dividend rate is 5.64%, ranking second among A-share listed expressway players, and has a significant dividend rate advantage.
Profit Forecasts, Valuations, and Ratings
We expect the company's operating income for 2023-2025 to be 48.89/51.86/5.403 billion yuan, with a year-on-year growth rate of 17.27%/6.10%/4.17%, respectively; net profit for return to the mother to be 16.05/17.39/1,854 billion yuan, with a year-on-year growth rate of 25.67%/8.36%/6.60%, respectively; a 3-year CAGR of 13.23% and EPS of 0.77/0.83/0.89 yuan, respectively. Given the company's significant location advantage in road production and maintaining a high dividend policy, with reference to comparable company valuations, we gave the company 11 times PE in 2023, with a target price of 8.47 yuan. Maintain the “increase in holdings” rating.
Risk warning: Traffic growth falls short of expectations; investment in renovation and expansion exceeds expectations; charging policy changes.