Incidents:
In 2023, the company achieved annual revenue of 4.889 billion yuan, an increase of 17.04% over the previous year, and achieved net profit of 1,634 billion yuan to mother, an increase of 28.01% over the previous year. In 2023, the company calculated a credit impairment loss of 123 million yuan, mainly due to the full amount of maintenance expenses advanced by Guangfo Company to prepare for impairment. In 2023, the company's dividend payment capital was 1,144 billion yuan, with a cash dividend of 5.47 yuan for every 10 shares, with a dividend rate of 70%.
Benefiting from the recovery in traffic, road transport revenue increased 17.5% year on year. In 2023, the company achieved toll revenue of 4.811 billion yuan, an increase of 17.46% year on year. The company held the Lushan Fokai Expressway, Guangzhou-Zhudong Expressway and Guanghui Expressway achieved revenue of 15.21/11.57/ 2.112 billion yuan respectively, up 17.38%/28.15%/16.45% year on year, respectively. Among the participating road companies, with the exception of the Jiangzhong Expressway, which was affected by the renovation, expansion and diversion, all road property toll revenue achieved positive growth, which led to a 22.57% year-on-year increase in investment income. Currently, the Guangzhou-Zhudong Expressway is undergoing renovation and expansion work. By the end of 2023, a total of 1,648 billion yuan was invested, and the project progress was about 12%. The Guanghui Expressway is in the early stages of the renovation and expansion project. I am optimistic that the main road property will effectively extend the toll operation period after completion, and traffic capacity is expected to be fully released.
Excellent cost control drives year-on-year improvement in gross margin
The company's operating costs in 2023 were 1,741 billion yuan, up 9.74% year on year. Among them, depreciation and amortization costs/cash costs were 1,138 million yuan and 570 million yuan respectively, up 11.13%/8.37% year on year. The company's overall gross margin in 2023 was 64.32%, up 2.36 pct year on year. In terms of branch production, the gross margins of the Fokai Expressway, Guangzhou-Zhudong Expressway, and Guanghui Expressway were 60.29%/66.24%/66.55% respectively, with a year-on-year change of 9.56/6.74/-0.29 pct, and the gross margin of road production remained at a high level.
The company maintains a high dividend policy, and the dividend ratio has a clear advantage
The company issued the “Shareholder Return Plan for the Next Three Years (2024-2026)”. The profit distributed in cash for each year 2024-2026 is not less than 70% of the consolidated net profit realized in the current year. Assuming that the company's dividend rate in 2024 is 70%, based on the closing price of 9.72 yuan on March 18, it is estimated that the company's dividend rate in 2024 will be about 5.9%, which has a significant dividend rate advantage.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 49.88/51.29/5.211 billion yuan, respectively, with year-on-year growth rates of 2.23%/2.83%/1.60%; net profit to mother of 17.10/17.96/1,864 billion yuan, respectively, with year-on-year growth rates of 4.64%/5.07%/3.79%; 3-year CAGR of 4.50% and EPS of 0.82/0.86/0.89 yuan respectively. In view of the company's significant advantages in production locations and maintaining a high dividend policy, with reference to comparable company valuations, we gave the company 13 times PE in 2024, with a target price of 10.66 yuan. The rating is maintained as an “plus” rating.
Risk warning: Traffic growth falls short of expectations; investment in renovation and expansion exceeds expectations; changes in charging policies.