A leading enterprise in urban construction and operation, with broad scope for future growth. For the first time, coverage was given a “buy” rating
As the first listed company in the infrastructure sector in China, Tunnel Co., Ltd. can provide integrated services for the entire industry chain of “planning consulting, investment, design, construction and operation” for cities around the world. With digital transformation and upgrading, there is plenty of room for future performance growth. We expect the company's revenue for 2023-2025 to be 713.2, 794.4, and 86.48 billion yuan, respectively, with year-on-year growth rates of 9.3%, 11.4%, and 8.9%; net profit to mother of 30.7, 34.5, and 3.65 billion yuan respectively, with year-on-year growth rates of 9.4%, 12.2%, and 6.0%, respectively; after dilution, EPS is 1.0, 1.1, and 1.2 yuan, respectively, and the corresponding PE price is 5.8, 5.2, and 4.9 times. The first coverage gives a “buy” rating.
Performance maintained a steady upward trend, and stable high dividends showed value
In the first three quarters of 2023, the company achieved operating income and net profit of 469.1 billion yuan and 1.49 billion yuan respectively, up 9.0% and 8.1% year-on-year respectively, and achieved positive growth for many years. The company's overall settlement gross profit margin and net margin for the first three quarters of 2023 were 11.9% and 3.4%, respectively. Thanks to good profitability, the company has maintained a dividend ratio of more than 30% over the years. In November 2023, the company implemented semi-annual dividends for 2023, with a total dividend of 310 million yuan, accounting for 40.6% of net profit due to mother for the first half year of 2023.
The infrastructure sector covers the entire cycle, creating a high-tech barrier. Moat's infrastructure construction business includes three sub-sectors: engineering construction, engineering design, and infrastructure investment and operation. The construction business, design service business, investment business, and operation business achieved revenue of 194.8 billion yuan, 6.9, 11.2 billion yuan, and 1.26 billion yuan respectively in the first half of 2023, compared with +21.1%, -39.9%, +0.7%, and +20.6% compared with the same period in 2022. In terms of profitability, the four business settlement gross margins for the first half of 2023 were 8.7%, 26.7%, 36.3%, and 12.1%, respectively. Among them, the gross margin of the construction and operation business declined compared to the full year of 2022.
The development of digital elements is imminent and is expected to drive the release of corporate value
With the improvement of the top-level system, the dividends of data elements are about to explode. The company's urban operation group has long-term experience in construction, operation and management, and continues to advance the data commercialization process. Take the G15 Jialiu Expressway operated by the company as an example. The results were remarkable after the digital transformation. At the same time, in May 2023, the company's first “Low Speed Work Vehicle Time and Space” data product was successfully listed on the Shanghai Data Exchange, which is expected to drive the transformation and upgrading of the company's business model.
Risk warning: The growth in business orders fell short of expectations, and the improvement in the growth rate of infrastructure investment fell short of expectations.