The company released its 2023 annual report: 1) Operating income of 26.55 billion yuan, +18.62% year on year; net profit to mother of 3.3 billion yuan, +8.5% year on year; net profit after deducting non-return to mother of 2.93 billion yuan, up 18.2% year on year, ROE 9.3%, +0.83 pct year on year. 2) On a quarterly basis, 2023Q1-4 realized net profit of 7.89, 9.3, 804, and 407 million yuan, respectively, +9.85%, +15.7%, +11.58%, and +75.19%, respectively. Note: The company completed the merger of enterprises under the same control of Shandong Expressway Information Co., Ltd. in December 2023, and the data for the comparable period was adjusted retroactively in accordance with the requirements of accounting standards. 3) Profit distribution plan: 0.42 yuan per share, an increase of 0.02 yuan over 2022, cash dividend ratio of 61.7%, corresponding dividend rate of 4.6%. (Closing price as of 4/19)
The main toll road business is recovering steadily. 1) Road production scale: As of 2023, the total mileage of road and bridge assets operated and managed by the company is 2,864 kilometers, of which the company's own road and bridge asset mileage is 1,555 kilometers, and the road and bridge asset mileage under the trust management of the Shandong Expressway Group is 1309 kilometers. 2) Operating data: In 2023, toll revenue (tax included) was 10.557 billion yuan, +10.6% year over year, traffic volume +23% year over year, gross profit margin 53.62%, and -0.9 pct year on year. The company's toll revenue in 2019 was 6.912 billion yuan, an average annual increase of 11.17% until 2023. 3) Significant growth in revenue and traffic flow: a) The Jiqing Expressway achieved revenue of 3.6 billion yuan, +7.4% year-on-year, and traffic volume +21.5%, accounting for 34% of the revenue of the main toll road business. Revenue in 2019 was 1,989 billion yuan. The revenue in 2023 was 81% higher than in 2019. Traffic volume increased 32%, and the effects of the renovation and expansion were fully released; b) The Beijing-Taiwan Expressway related section achieved revenue of 2.16 billion yuan, +43.1% year-on-year, and traffic volume +64% year-on-year. Among them, the Beijing-Taiwan Expressway Jitai section expansion project was on October 22 It was completed and opened to traffic on the 12th, significantly improving the overall traffic capacity and service level of the Shandong section of the Beijing-Taiwan Expressway. Road production on the Beijing-Taiwan Expressway accounts for 20.5% of the main toll road; c) The Jihe Expressway was affected by the renovation and expansion. The main line was half closed for construction and half was one-way traffic, achieving operating revenue of 595 million yuan, revenue -47% YoY and traffic volume -44% YoY. 4) Cost structure of the main highway business: depreciation and amortization of 3.1 billion yuan, +14.38% year-on-year, and special maintenance costs of 720 million yuan, +14.17% year-on-year.
Other major business revenue conditions: Railway business revenue of 2.37 billion yuan, up 16.1% year on year; sales revenue of 3.17 billion yuan, up 19% year on year; mechanical and electrical engineering construction revenue of 3.39 billion yuan, up 3.4% year on year; high speed trusteeship revenue of 6.3 billion yuan, down 4.3% year on year. In addition, the revenue and cost of construction services listed due to accounting standards was $5.18 billion.
Core highlights: 1) The remaining toll period is long. In particular, the Jiqing Expressway, which accounts for 35% of toll revenue, has 20 years left. The results of the road renovation and expansion related sections of the Jiqing Expressway and Beijing-Taiwan Expressway are in the release stage.
2) The amount of dividends per share is rising steadily, and it is promised that the dividend ratio for 2020-24 will not be less than 60%. 3) The arbitration was settled, and Trade Mediation issued a ruling on March 15, 24, ruling that Shenzhen Talent Security Group paid 2 billion yuan of equity transfers and interest and other related expenses to the company's subsidiary Changying Jincheng.
Investment advice: 1) Profit forecast: We maintain our 24-25 performance forecasts of 3.6 billion yuan and 3.9 billion yuan respectively. We expect to achieve net profit of 4.2 billion yuan in 26, with year-on-year increases of 9.9%, 8.6%, and 7% in 24-26, respectively, corresponding to EPS of 0.75, 0.81 and 0.87 yuan respectively in 2024-2026, and PE of 12, 11, and 10 times, respectively. 2) Assuming that the company maintains the 23-year cash dividend ratio, the 24-25 dividend ratio is calculated at 61.7%, and the corresponding 24-25 dividend rates are 5% and 5.5%, respectively. We set the price with an expected dividend rate of 4% for 2024, with a target price of 11.5 yuan, which is expected to be 27% of the current price, maintaining the “recommended” rating.
Risk warning: The recovery in bus and truck traffic falls short of expectations, and investment in new road production falls short of expectations, etc.