剔除申嘉湖杭处置收益后，公路分部利润同比增长98%，主因：1）经济复苏驱动客车流量大幅改善；2）22 年受疫情影响，基数较低；3）两龙公司以前年度未确认税务亏损抵扣。公路分部利润较21 年增长22%。分路段看，沪杭甬高速通行费较21 年增长14%，内生增长强劲；上三高速通行费较21 年下降11%，受到杭绍台高速（22 年2 月全线通车）的分流影响；两路段合计约占总通行费的六成。杭徽/徽杭/舟山跨海大桥通行费收入较21 年增长15/28/29%，受益于旅游需求释放；三路段合计约占总通行费的两成。Core view: 23 Net profit was slightly higher than expected, but dividends per share declined year on year. Zhejiang, Shanghai, Hangzhou, and Ningbo announced 2023 results, achieving total revenue of 17 billion yuan (+10.7% YoY after restatement) and net profit of 5.22 billion yuan (+0.9% YoY after restatement). 23 Net profit was slightly higher than our expectations ($5.03 billion). In Q4 '22, the Shenjia-Huhang Expressway produced disposal revenue of 1.88 billion yuan, making the performance base high. After excluding this matter, road business profit increased 98% year on year in '23 (after restatement), mainly due to a recovery in traffic, a low performance base, and tax credits for Lianglong. In '23, brokers' profits increased 12% year over year, and other business profits increased 9% year over year. We adjusted our net profit forecast for 2024/2025/2026 to $56.2/59.7/6.23 billion (previous value: $56.5/60.7/-billion) due to higher-than-expected road costs in 2024/2025/2026. We adjusted the target price to HK$6.26 (previous value HK$6.40), which is still based on the segmented valuation method, where the road discount rate WACC is 6.8%. The company plans to pay a dividend of 0.32 yuan/share for 2023 (down 15% year on year), with a dividend rate of 7.1% (closing price on 2024/3/27). Maintain “buy-in.”
Economic recovery drives a rebound in travel demand
Toll road revenue/segment profit increased 15%/1% year over year in '23, contributing about 70% to mother's net profit.
Excluding the proceeds from the disposal of Shenjia Huhang, the highway division's profit increased 98% year-on-year, mainly due to: 1) significant improvement in passenger traffic driven by economic recovery; 2) the impact of the epidemic in '22, which had a low base; 3) Lianglong did not confirm tax loss deductions from previous years. The Highways segment's profit increased 22% from '21. Looking at road segments, the toll for the Shanghai-Hangzhou-Ningbo Expressway increased 14% over '21, with strong endogenous growth; the toll for the last three expressways decreased 11% from '21, which was affected by the diversion of the Hangzhou-Shaotai Expressway (full opening of traffic in February '22); the two sections together account for about 60% of the total toll. Toll revenue from the Hanghui/Huihang/Zhoushan Cross-Sea Bridge increased by 15/28/ 29% over 2021, benefiting from the release of tourism demand; the three sections together account for about 20% of the total toll.
Securities earnings bucked the trend and recorded growth in '23
Securities business revenue/segment profit increased 5/12% year over year in '23, contributing about 14% to net profit to mother. Despite the decline in trading activity in the A-share market and the decline in the Shanghai and Shenzhen 300 Index in 23, the company's brokerage business bucked the trend and recorded growth. Among them, investment banking, futures, and securities investment were the main growth points. In '23, the company's brokerage business commission and fee revenue increased 6.2% year on year, and interest income increased 2.6% year on year; securities investment income increased 51% year on year, mainly benefiting from the strengthening of the bond market.
Capital expenditure or increase due to road renovation and expansion
The company invested in the Ningbo-Taiwen/Huangqunan/Yonglan Expressway in Q4 in '23, and the investment expenditure reached 1.77 billion yuan. We expect the acquisition project to have a slight benefit to net profit in '24. The company disclosed that the 24-year capital expenditure plan reached 6.2 billion yuan (actual expenditure of 3.33 billion yuan in 23), and there is still a plan of 1.06 billion yuan for equity investment. The Jinhua section of the Ningjin Expressway, Shaoxing section, and the Chajiasu Expressway began renovation and expansion at the end of 23. The 24-year investment plan reached 3.78 billion yuan. We expect capital expenditure to remain large in 24-26.
Risk warning: Traffic growth is lower than expected, A-share market turnover is lower than expected, road network diversion is higher than expected, capital expenditure is higher than expected, and fees have been lowered beyond expectations.