1Q24 results are basically in line with expectations
The company announced 1Q24 results: revenue of 3.47 billion yuan, -4.3% year on year; net profit to mother of 1.25 billion yuan, corresponding to profit of 0.25 yuan per share, +1.6% year over year, which is basically in line with expectations.
By business: 1) 1Q24 toll revenue accounted for about 66% of total revenue, with revenue amount +2.1% year over year. Among them, the average daily charge for the Shanghai-Nanjing Expressway decreased 4.7% year on year due to rain and snow and high base during the same period last year. The Wufengshan Bridge benefited from the completion of the Beijing-Shanghai Expressway renovation and expansion, and the average daily charge increased 55.4% year on year; 2) Oil sales revenue in the supporting business fell 6.9% year on year, and gross margin decreased 2.67ppt year on year; mainly due to the completion of a new round of electricity supplier recruitment work in some service areas last year; 3) sales Revenue increased 18.2% year over year, benefiting from the subsidiary's offshore wind power project's feed-in power increase year over year.
Development trends
The capital expenditure cycle has begun, and the Suxichang Expressway and the Xitai Expressway may become the driving force for the company's growth. 1) On December 27, 2023, the company announced an investment in the Wuxi-Suzhou section of the Wuxi-Taicang Expressway. The total investment is estimated at about 24.2 billion yuan. The company's share ratio is 50%. The Xitai Expressway is connected to the Sukuntai Expressway, forming a new east-west expressway between Wuxi and Shanghai, which is an important inter-provincial corridor between Suzhou and Shanghai. 2) On January 29, 2024, the company announced the acquisition of 65% of the shares of Suxi Changnan Expressway, with a purchase consideration of 5.2 billion yuan. Road Land is located on the south side of the main cities of Suzhou, Wuxi and Changzhou, and is an important intercity transportation hub in the Yangtze River Delta region; in addition, the company added the performance promise of the Suxichang Project in the March 2, 2024 announcement. The acquirer Jiangsu Traffic Control promised that the company's 2024-2028 performance would not be less than 1.55/3.48/3.48/477 million yuan, respectively. At present, Su Xichang's project has been approved by independent shareholders.
The dividend per share may remain unchanged. In addition to the impact of the epidemic in 2020-2022, the company's performance and dividends per share have increased almost year by year since 2014. Under the influence of the epidemic, the absolute amount of the company's annual dividends did not decrease, and the company's dividend per share increased by 1 cent in 2023. Based on the company's historical dividend model and future capital expenditure, we believe that the company's dividend per share may not decline in the future.
Profit forecasting and valuation
Taking into account the rising financial costs of the company entering the capital expenditure cycle due to increased interest-bearing liabilities, and the fact that there is more complicated weather than in previous years, we lowered our profit forecast for 2024/25 by 6.6%/5.5% to 46.7/4.96 billion yuan, with a year-on-year growth rate of 5.9%/6.1%. The company's current 2024/25 P/E is 12.4x/11.7x, and H shares are 7.5x/6.8x. Assuming that the dividend per share is flat, the dividend rate for A shares is 4.1% and the dividend rate for H shares in 2024 is 6.7%. Considering the sustainability of the dividend style, we maintain our rating of outperforming the industry and maintain a target price of RMB 12.0 for A-shares and HK$9.92 for H shares, with an upward margin of 4.4% and 26.7%, respectively.
risks
Traffic falls short of expectations due to complicated weather, and Suxi often's performance falls short of expectations.