Shandong Expressway released the 2023 Annual Report on April 18, 2024:
In 2023, the company achieved operating income of 26.546 billion yuan, up 18.62% year on year (adjusted); net profit to mother of 3.297 billion yuan, up 8.47% year on year (adjusted); net cash flow from operating activities was 6.010 billion yuan, up 15.08% year on year (adjusted); basic earnings per share was 0.574 yuan, up 6.10% year on year (adjusted); and weighted average return on net assets was 9.30%, up 0.83 percentage points year on year (adjusted).
In Q4 2023, the company achieved operating income of 8.606 billion yuan; net profit to mother of 630 million yuan; and net cash flow from operating activities of 1,578 billion yuan.
Toll revenue increased year-on-year, and renovation and expansion projects are progressing steadily. 1) In 2023, the company achieved toll revenue (including tax) of 10.557 billion yuan, an increase of 10.57% over the previous year. Among them, the core production of the Jiqing Expressway achieved toll revenue (tax included) of 3.63 billion yuan, an increase of 7.40%; the Beijing-Taiwan Expressway related section achieved toll revenue (tax included) of 2.165 billion yuan, an increase of 43.05% over the previous year, mainly benefiting from the increase in overall traffic capacity and service level of the Shandong section of the Beijing-Taiwan Expressway after the completion and opening of the Jitai section; the Jihe Expressway achieved toll revenue (tax included) of 595 million yuan, a year-on-year decrease of 47.04%, mainly due to the Jihe Expressway renovation and expansion project starting February 16, 2023 Closed construction, one-way traffic in half. 2) In 2023, the Qiji section renovation and expansion project of the Beijing-Taiwan Expressway completed an investment of 2,312 billion yuan, completing the annual investment target one and a half months ahead of schedule, exceeding the annual task by 32 percentage points; the Jihe Expressway renovation and expansion project completed an annual investment of 5.26 billion yuan. According to the overall traffic organization plan of “half closed construction, half one-way traffic maintenance”, it successfully completed road closure and full line traffic guidance reform in the direction of Jinan.
The development of rail transit is improving, and the traffic volume has broken the 100 million ton mark. In 2023, Rail Transit Group achieved operating revenue of 4.550 billion yuan, up 2.82% year on year; net profit of 447 million yuan, up 14.78% year on year. Among them, the railway transport sector completed annual traffic volume of 105 million tons, up 17.6% year on year, becoming the country's first provincial local railway enterprise with annual freight volume exceeding 100 million tons; annual oil traffic reached 18.62 million tons, up 12.4% year on year; the annual cargo volume growth rate of the Yiyang Railway and Pinglan Railway both exceeded 10% year on year, and the traffic volume of the Lingang Railway reached 8.79 million tons, an increase of 117% year on year.
Acquisition Information Group extends the industrial chain and actively creates new profit growth points. In 2023, the company completed the 65% share acquisition of Shandong Expressway Information Group Co., Ltd., laying out the road maintenance market and smart transportation transformation and development ahead of schedule. Information Group mainly focuses on construction, software and hardware development, operation and maintenance in fields such as smart transportation and smart cities. The revenue sources mainly include highway mechatronic system integration project construction revenue, software and technology development service revenue, etc., and it has high synergy with the company's main business, which is conducive to extending the company's industrial chain. In 2023, Information Group achieved revenue of 4.360 billion yuan, a year-on-year increase of 8.72%; net profit of 313 million yuan. The acquisition of Information Group will improve the company's business layout and profit level, and related businesses are expected to become a new profit growth point for the company in the future.
The promise of a high percentage of dividends has been fulfilled, demonstrating long-term investment value. According to the “Shareholder Return Plan for the Next Five Years (2020-2024)” issued by the company, when the conditions for cash dividends are met, the profit distributed by the company in cash each year in 2020-2024 is not less than 60% of the net profit of the parent company's owners in the consolidated statement achieved in that year. In 2020-2022, the company's cash dividend ratio was over 60%. In 2023, the company plans to pay a cash dividend of 0.42 yuan (tax included) per share, with a cash dividend ratio of 61.66%. Based on the closing price of 9.02 yuan on April 18, 2024, the estimated dividend rate is about 4.7%.
Profit forecast, valuation and investment rating: The company is expected to achieve net profit of 35.88 billion yuan, 38.32 billion yuan, and 4.231 billion yuan respectively (the previous forecast values for 2024-2025 were 35.39 billion yuan, 3.708 billion yuan, and the profit forecast for 2026 was added), earnings per share were 0.74, 0.79, 0.87 yuan, and the current stock price was 9.02 yuan. The corresponding PE is 12.2X/11.4X/10.3X, respectively, maintaining a “buy” rating.
Risk warning: the risk of deterioration of the macroeconomic environment, the risk of declining traffic traffic, the risk of fee policy adjustments, the risk that the renovation and expansion progress falls short of expectations, the risk that the return on investment falls short of expectations, and the risk of untimely update of usage information and data.