The company released its 2024 quarterly report: operating income of 1.56 billion yuan, +0.19% year on year; net profit to mother of 390 million yuan, -7.65% year on year; deducted non-net profit of 380 million yuan, +22.42% year on year. The main reason for the decline in net profit due to a decrease in fair value change earnings was -1.19 million yuan in 24Q1 and 120 million yuan in 23Q1.
Q1 The net profit after deducting non-net profit was the highest in the past ten years. 24Q1 deducted 380 million yuan of non-net profit, the highest Q1 value in nearly ten years since 2015. Q1 net profit for 2019-2024 was 2.25, -0.28, 3.15, 3.64, 3.13, and 383 million yuan, respectively. 2024 increased 22.4% from 2023 and 70.2% from 2019.
Revenue from Q1 transit services remained generally flat, with good growth in March. The total toll revenue for the first quarter was 986 million yuan, +0.61% year on year; of these, toll revenue for March was 316 million yuan, +4.62% year over year, and total toll revenue for January-January was 670 million yuan, -1.17% year on year. We believe that the slight decline in company toll revenue in January-February was mainly affected by snow and ice weather, which temporarily affected road travel.
The cost control effect is obvious: gross margin increases and financial expenses are reduced. Operating costs were $823 million, -4.04% YoY. The gross profit margin was 47.2%, +2.3 pct. The cost rate for the period was 11.4%, -1.3 pct year on year, and the cost for the period decreased by 2021 million (or -10.2%) year over year. Among them, financial expenses decreased by 17.57 million (or -15.7%) year over year, management expenses decreased by 4.33 million (or -6.7%) year over year, and R&D expenses decreased by 1.56 million (or -20.5%) year over year. The company has achieved certain results in controlling expenses, especially in terms of costs such as expenses, which have been drastically reduced. The company is expected to continue to reduce financial expenses by optimizing the debt structure and reducing financing costs.
We emphasize that the company has clear room for optimization and that the value of assets is undervalued. Highlight 1: We believe there is clear room for improvement in financial expenses. As the company's past few high-interest bonds expire, financial expenses will be significantly optimized.
In 2024, the 2.3 billion yuan 14 Ganyue-02 (interest rate is 6.09%) will expire, and interest rates on ultra-short-term financing notes recently issued by the company will continue to decrease, leading to continuous optimization of financial expenses. Highlight 2: The remaining charging period for the company's core road products is long. The renovation and expansion have unleashed new growth potential, and the value is undervalued. The remaining toll periods for the Changjiu Expressway and Changzhang Expressway have reached 25 and 19 years respectively; construction of the Zhangji section of the Changtai Expressway officially commenced in 2022. The Changjiu Expressway achieved revenue expansion after the renovation and expansion of the Changtai Expressway. After the completion of the renovation and expansion of the Changtai Expressway, the north-south corridors in Jiangxi Province will all have eight lanes, improving traffic efficiency and helping to further develop the road network connectivity effect.
Investment advice: 1) Profit forecast: We maintain the company's profit forecast for 2024-26, that is, the net profit due to mother is expected to be RMB 1.3, 14.1, and 1.48 billion yuan, respectively, and the corresponding EPS is 0.56, 0.6, and 0.63 yuan, respectively, and the corresponding PE is 8, 8, and 7 times, respectively. 2) Target price: We give the company an estimated net profit of 10 times PE in 2024, corresponding to a target market value of 13 billion yuan and a target price of 5.61 yuan. We expect 20% of the space compared to the current price, maintaining a “strong push” rating.
Risk warning: The progress and results of the renovation and expansion fall short of expectations; the increase in traffic falls short of expectations.