Key points of investment
Event: Guangdong Expressway A released its semi-annual report for 2023: the company achieved operating income of 2,340 billion yuan in the first half of 2023, up 13.76% year on year (after adjustment); net profit of 886 million yuan, up 14.46% year on year (after adjustment); basic EPS for the first half of 2023 was 0.42 yuan/share; net profit of 914 million yuan after deducting net profit of 914 million yuan, up 22.97% year on year.
Looking at a single quarter, in the second quarter of 2023, the company's operating income was 1,186 million yuan, up 19.63% year on year; net profit of 476 million yuan, up 38.78% year on year; net profit after deducting non-return net profit of 490 million yuan, up 44.65% year on year.
Comment:
Traffic has picked up, toll revenue has risen sharply, and lower Fokai Expressway costs have led to an increase in gross profit. The company's main source of revenue and profit is highway toll revenue. In the first half of 2023, the company's holding road production achieved toll revenue of 2,311 million yuan, accounting for 98.73% of total revenue, an increase of 14.41% over the previous year. Among them, the Guangfo Expressway stopped charging in March 2022; the Guanghui Expressway, Fokai Expressway, and the Guangzhu section of the Beijing-Zhuhai Expressway achieved toll revenue of 1,018 million yuan, 734 million yuan, and 558 million yuan respectively, accounting for 43.49%, 31.38%, and 23.86% of total revenue, an increase of 15.61%, 15.28%, and 27.64% over the previous year. The main reason for the increase in toll revenue is the gradual improvement of the domestic economy, and the steady increase in traffic in expressway projects owned by the company. In terms of costs, operating costs for the first half of 2023 were 741 million yuan, up 6.40% year on year. Among them, the costs of the Fokai Expressway, the Guangzhou-Zhu section of the Beijing-Zhuhai Expressway, and the Guanghui Expressway were 241 million yuan, 161 million yuan, and 324 million yuan respectively, up -2.79%, 11.77%, and 20.26% year-on-year respectively. The main reasons for the decline in the cost of the Guangzhou-Foshan Expressway are: 1) After the renovation and expansion of the Guangfo South section, the charging period was approved in June '21, and the toll period was extended and depreciated. 2) The depreciation period for pavement assets in the northern section of Guangfo is 10 years (2012-2022). Depreciation costs declined year-on-year in the first half of 2023 due to the end of depreciation in 2022. In terms of gross profit, in the first half of 2023, the company achieved gross profit of 160 billion yuan, an increase of 17.52% over the previous year. The Fokai Expressway, the Guangzhou-Zhu section of the Beijing-Zhuhai Expressway, and the Guanghui Expressway achieved gross profit of 493 million yuan, 397 million yuan, and 649 million yuan respectively, up 26.83%, 35.44%, and 13.56% year-on-year. In terms of gross margin, in the first half of 2023, the company's gross margin in the road transport industry was 68.57%, an increase of 2.17 pcts over the previous year. The gross margins of the Fokai Expressway, the Guangzhou-Zhu section of the Beijing-Zhuhai Expressway, and the Guanghui Expressway were 67.14%, 71.15%, and 68.18%, respectively, with year-on-year increases of 6.11 pcts, 4.09 pcts, and -1.23 pcts.
Risk warning: The economic downturn has led to a decline in traffic flow, changes in charging policies, reinvestment risks, etc.