2023 results are in line with our expectations
The company announced its 2023 results: achieving revenue of 4.88 billion yuan, up 17.0% year on year (after retroactive adjustment); net profit to mother of 1.63 billion yuan, up 28.0% year on year (after retroactive adjustment), in line with the performance report and our expectations; the company's net profit withheld from the mother was 17.1 billion yuan, an increase of 30.1% year on year (after retroactive adjustment), and the company's non-recurring profit and loss included credit impairment provisions calculated on behalf of Guangfo high-speed maintenance expenses of about 120 million yuan.
Looking at the fourth quarter of a year, the company achieved revenue of 1.19 billion yuan, an increase of 35.3% over the previous year, and net profit to mother of 280 million yuan, an increase of 225.2% over the previous year.
Development trends
Residents' travel picked up sharply, and the company's toll revenue recovered. In 2023, the company achieved toll revenue of 4.81 billion yuan, a year-on-year increase of 17.5%, down 7.0% from 2021, mainly due to the expiration of the Guangzhou-Foshan Expressway. After excluding this impact, toll revenue increased 1.9% compared to 2021. Among them, toll revenue for the Guangzhu section of the Fokai/Beijing-Zhuhai Expressway/Guanghui Expressway increased by 17.4%/28.2%/16.5% in 2023, respectively, and 4.6%/1.4%/0.3%, respectively, compared with 2021.
Road production has an excellent location, and traffic is expected to maintain steady growth. According to data from the Guangdong Transportation Department, the cumulative traffic in Guangdong Province increased 6% year on year during the 2024 Spring Festival travel season. Among them, total highway traffic in the Guangdong-Hong Kong-Macao Greater Bay Area increased 5.4% year on year. The company's road production location is excellent. In the short term, we believe that the passenger transportation boom is expected to continue, and freight traffic is expected to improve marginally; in the medium to long term, the Guangzhou-Zhu section of the Beijing-Zhuhai Expressway, which the company mainly controls, is being renovated and expanded. We believe that the increase in traffic capacity after the renovation and expansion is completed will increase the profit level of this road production, and is expected to extend the charging period to support the company's long-term growth.
The high dividend ratio continues, and it has long-term allocation value. The company announced the “Shareholder Return Plan for the Next Three Years (2024-2026)”. The annual cash dividend for 2024-2026 will not be less than 70% of net profit returned to mother. The dividend policy continues, and it is currently one of the companies with the highest dividend ratio for listed highway companies.
In the past, the company's performance grew steadily and supported by high dividends. Since 2016 (March 15, 2024), the company's cumulative yield (including dividends) has reached 112%, with long-term allocation value. According to our estimates, the current price corresponds to the 2024/2025 dividend rate of 6.1%/6.3%, respectively, and the dividend ratio is still attractive.
Profit forecasting and valuation
Keep the profit forecast for 2024 unchanged, and introduce profit of $1.82 billion for 2025. The current A-share price corresponds to the 2024/2025 price-earnings ratio of 11.4 times/11.1 times. Maintaining an outperforming industry rating, due to the valuation switch to 2024 and the company's dividend ratio is high and certainty, we raised our target price by 15.0% to 11.04 yuan, which corresponds to 13.0 times the 2024 price-earnings ratio. There is 14.3% upside compared to the current stock price.
risks
The economic growth rate fell short of expectations, and the diversion exceeded expectations.