The company announced its 2023 annual report: 1) In 2023, it achieved operating income of 9.295 billion yuan, -0.82% year-on-year, and realized net profit of 2,327 billion yuan, +15.41% year-on-year, and realized net profit after deduction of 2.24 billion yuan, or +82.38% year-on-year. 2) By quarter: 2023Q1-4 achieved operating income of 19.04 billion yuan, 22.21, 22.46, and 2,924 billion yuan, respectively, +7.38%, -4.31%, -11.98%, and +7.25% year-on-year net profit of 4.43, 4.87, 6.1, and 788 million yuan, respectively, +7.13%, +11.73%, -47.87%, and +45451.96% year-on-year, achieved net profit of 4.37, 3.67, 6.14, and 822 million yuan, respectively. %, +6.59%, +20.91%, +2120.44%. 3) Profit indicators: 2023 gross sales margin 36%, year-on-year +3.79pct, net sales margin 25.67%, year-on-year +4.83pct. 4) Profit distribution plan for 2023, RMB 0.55 per share (tax included), totaling RMB 1.2 billion, accounting for 56.03% of net profit after excluding investment income payable by investors in perpetual bonds, and 51.6% of total net profit attributable to mother.

Toll road business: Revenue was +8% year-on-year, and Yichang Express Public REITs were sold. Achieved toll revenue of 5.375 billion yuan, +8% year over year, gross profit margin of 50.38%, and +6.63 pct year over year. Major projects such as Riverside Phase II, Outer Ring Phase III, and the Longli River Bridge are progressing in an orderly manner; in terms of project development, the construction of the Outer Ring Road Project, the preliminary renovation and expansion of projects under the Bay Area Development are being promoted, and the company's road production has been continuously replenished. Hunan Yichang Express Public Investment REITs were sold on March 7, 2024. The final fund share was raised for 300 million shares, the sale price was 6825 yuan/share, and the total capital raised was 2,047.5 billion yuan, of which 40% of the company participated in strategic placement subscriptions.

Toll road business by region: 1) Shenzhen, Guangdong Province, average daily mixed vehicle traffic +18.96%, average daily toll revenue +18.25%; 2) in other regions of Guangdong Province, average daily mixed vehicle traffic +20.77%, average daily toll revenue +24.12%; 3) In other provinces, since the franchise period of the Wuhuang Expressway expired and terminated on December 10, 2022, the total toll road business revenue of other provinces was -14.7%.

Environmental protection sector: The strategic layout of the industry is becoming more and more perfect. 1) Clean energy: In terms of wind power generation business, the total installed capacity of wind power projects invested and operated by the company reached 648 MW, achieving wind power business revenue of 757 million yuan. 2) Solid waste resource treatment: In terms of organic waste treatment business, the organic waste treatment capacity was 1419.93 thousand tons, and operating revenue of 652 million yuan was achieved. 3) Project progress: The Shaoyang organic waste treatment project has entered trial operation, and the Ya'an organic waste treatment project is actively advancing preliminary work. At the end of the reporting period, the company's organic waste design and treatment scale exceeded 6,900 tons/day. The company actively promotes the expansion of clean energy power generation projects, and the new energy company obtained independent development targets for 60MW photovoltaic projects and 70MW photovoltaic projects in Pingshan County, Hebei.

Investment advice: We expect the company to achieve net profit of 27.3 billion yuan, 29.4 billion yuan, and 3.27 billion yuan in 2024-2026, corresponding to EPS of 1.25, 1.35 and 1.5 yuan respectively, and PE of 8, 7, and 6 times, respectively.

Based on the 51% dividend ratio, calculated at the 3/29 closing price, the corresponding dividend rates for 24-25 are 6.6% and 7.1%, respectively. We gave the expected profit of 2024 9.5 times PE, with a target price of 11.9 yuan, 23% of the current price space. We continue to be optimistic about the promotion of the company's two main businesses, continue to enhance the value of the industrial chain, and maintain a “recommended” rating.

Risk warning: Traffic volume declined more than expected due to the epidemic, environmental protection projects fell short of expectations, etc.