Key points of investment

The company announced its 2024 quarterly report: revenue of 3.473 billion yuan, a year-on-year decrease of 4.3%, operating costs of 1,832 billion yuan, a year-on-year decrease of 6.1%, and realized net profit of 1,247 billion yuan to mother, an increase of 1.6% over the previous year, after deducting net profit of 1,187 billion yuan. The decrease in costs is due to a year-on-year reduction in oil procurement costs, real estate sales costs, and construction period costs.

By business:

(1) Main highway business: toll road business revenue was 2,276 billion yuan, an increase of 2.1% over the previous year. Affected by the rainy and snowy weather and the high base in the same period last year, traffic volume on the Jiangsu section of the core road production line of the Shanghai-Nanjing Expressway decreased by 0.04% year on year, and the average daily toll amount was 136 million yuan, down 4.8% year on year;

(2) Other business:

Ancillary business revenue was 416 million yuan, a year-on-year decrease of 4.5%. Affected by the decline in oil sales volume and the fact that some service areas completed a new round of investment promotion work last year after terminating their original leasing contracts.

It was confirmed that revenue during the construction period was 467 million yuan, a year-on-year decrease of 18.3%. Construction of road and bridge projects declined year-on-year during the reporting period.

Electricity sales achieved revenue of about RMB 207 million, an increase of 18.2% over the previous year. Benefiting from weather factors, the subsidiary's offshore wind power project's feed-in electricity volume increased year on year.

The real estate business confirmed operating revenue of 75 million yuan, a year-on-year decrease of about 55.4%, and the scale of delivery declined during the reporting period.

Revenue from other businesses was RMB 0.32 billion, down about 35.0% year on year. After the subsidiary transferred shares in factoring companies last year, factoring business revenue declined.

Acquiring 65% of the shares in Suxi Changnan Expressway and improving the main business layout, the company signed an equity transfer agreement with Jiangsu Traffic Control on January 26, 2024. As of the reporting date, the prerequisites for the target share transfer had been achieved except for the transferor to complete the approval/filing procedures stipulated by supervisors/supervisory authorities such as the state-owned assets supervisory authority. After the acquisition is completed, the company will further expand its scale in the Southern Jiangsu Expressway network.

Profit forecasting and valuation

We estimate that the company's net profit for 2024-2026 will be 46 billion yuan, 5.2 billion yuan, and 5.4 billion yuan, respectively. The company has outstanding location advantages and stable high dividend characteristics. The DPS was raised to 0.47 yuan in '23, the absolute profit value is prominent, and the “gain” rating is maintained.

Risk warning

Highway construction investment falls short of expectations; impact of road rate policies; traffic flow growth falls short of expectations, etc.