Incidents:
In 2023, the company achieved annual revenue of 6.63 billion yuan, an increase of 27.4% over the previous year, and achieved net profit of 1.66 billion yuan to mother, an increase of 14.9% over the previous year. Among them, in the fourth quarter of 2023, the company achieved revenue of 2.29 billion yuan, an increase of 87.3% over the previous year, and achieved net profit of 310 million yuan to mother, an increase of 13.8% over the previous year. In 2023, the company paid a cash dividend of 0.601 yuan per share, with a dividend rate of about 60.05%.
Toll revenue grew steadily, up 10% from '22
In 2023, the company achieved toll revenue of 4.04 billion yuan, an increase of 9.9% over the previous year. Among them, the main road company, the Hening Expressway, achieved toll revenue of 1.43 billion yuan, an increase of 19.2% over the previous year. It mainly benefited from the drainage effects caused by the completion and opening of the connecting line to traffic at the end of 2022 and the renovation and expansion of the parallel Ningluo Expressway.
Toll revenue for Xuanguang and Guangci Expressway decreased by 21.8% and 14.7%, respectively, mainly due to the diversion caused by road section renovation and expansion construction and increased traffic capacity after the G318 parallel highway. Traffic on the Ningxuan-Hangzhou Expressway increased by 156.1% year-on-year after the completion of the entire line at the end of 2022, leading to a 202.6% increase in toll revenue. The Yuewu Expressway benefited from the full completion of the East Extension Line, and tolls increased by 82.4% in November-December.
The gross margin of the toll road business increased by 3.85 pct year on year
In 2023, the company's toll road business cost was 1.51 billion yuan, down 0.4% year on year, gross margin was 63.2%, up 3.85 pct year on year; construction service revenue for the Xuanguang Renovation and Expansion PPP Project adopted a zero-gross profit confirmation method. The company's financial expenses in 2023 were 110 million yuan, a year-on-year decrease of 26.9%, mainly due to the conversion of Ning Xuanhang Company shareholders' loans to capital reserves and lower LPR interest rates. The company confirmed the fair value change loss of 110 million yuan, mainly to confirm the fair value change loss of the CICC Anhui Traffic Control REIT Fund.
The company increased its dividend per share to 0.601 yuan. The dividend rate was 60.05%. The company paid a cash dividend of 0.601 yuan per share in 2023, up 9.3% from 0.55 yuan in 2022, and the dividend rate was about 60.05%. The company maintains a stable and high dividend. Assuming that the company's dividend rate in 2024 is 60%, based on the closing price of 13.86 yuan on March 29, the company's dividend rate is estimated to be about 4.9% in 2024.
Profit Forecasts, Valuations, and Ratings
Due to the adjustment of PPP project construction revenue forecasts, we expect the company's revenue for 2024-2026 to be 86.58/52.70/5.111 billion yuan, with year-on-year growth rates of 30.56%/-39.13%/-3.03%, respectively; net profit to mother of 18.81/19.88/ 21.50 billion yuan, with year-on-year growth rates of 13.30%/5.69%/8.14% respectively; 3-year CAGR of 9.00% and EPS of 1.13/1.20/1.30 yuan respectively.
The company's subsidiary road products are all major transit national highway lines passing through the Anhui region. With the opening of the Ningxuanhang Expressway and Yuewu Expressway, they are optimistic about the continuous boosting effect on traffic flow after the road network is completed. Referring to comparable company estimates, the company was given 14X PE in 2024, corresponding to a target price of 15.82 yuan, maintaining a “buy” rating.
Risk warning: Traffic growth falls short of expectations; changes in charging policies.