Shandong Expressway released its report for the first quarter of 2024 on April 29, 2024:
In Q1 2024, the company achieved operating income of 4.532 billion yuan, a year-on-year decrease of 11.87% (adjusted); realized net profit of 769 million yuan, a year-on-year decrease of 6.70% (adjusted); net cash flow from operating activities was 1,032 billion yuan, up 7.75% year on year (adjusted); basic earnings per share was 0.129 yuan, down 11.64% year on year (adjusted); and the weighted average return on net assets was 2.12%, down 0.11 percentage points year on year (adjusted).
Toll revenue declined year over year, and investment income increased year over year. By sector, 1) Road and bridge operations: In Q1 of 2024, the company achieved toll revenue (including tax) of 2,261 billion yuan, a year-on-year decrease of 12.21%. Among them, the core production of the Jiqing Expressway achieved toll revenue (tax included) of 698 million yuan, a year-on-year decrease of 14.38%, mainly due to weather and free policies, and the opening and diversion of the Jiqing Middle Line; the Jihe Expressway achieved toll revenue (tax included) of 122 million yuan, a year-on-year decrease of 44.27%, mainly due to the full renovation and expansion of the Jihe Expressway. From February 16, 2023, half of the main line was closed for construction and half was one-way traffic. 2) Investment and operation: In Q1 of 2024, the company achieved investment income of 324 million yuan, an increase of 6.15% over the previous year, including long-term equity investment income of 217 million yuan as calculated by the equity method, investment income of 3.814 million yuan during the holding period of trading financial assets, and interest income of 103 million yuan from bond investments during the holding period. 3) Rail Transit Group: In Q1 2024, Shandong High Speed Rail Transit Group Co., Ltd. achieved operating income of 965 million yuan; net profit of 66 million yuan. 4) Information Group: In Q1 2024, Shandong Expressway Information Group Co., Ltd. achieved operating revenue of 651 million yuan; fully resumed work on mechanical and electrical engineering projects such as Linlin, Dongqing, and Jihe; won the bid for integrated mechanical and electrical engineering construction of Dabei Ring Road to carry out equipment preparation and joint design work.
The renovation and expansion projects are progressing in an orderly manner to help medium- to long-term growth. 1) By the end of 2023, since the beginning of the Beijing-Taiwan Expressway Qihe-Jinan section renovation and expansion project, a total of 44% of the roadbed project had been completed; a total of 10% of the pavement project had been completed; and a total of 45.8% of the bridge culvert project had been completed. In Q1 2024, the Qiji project completed an investment of 200 million yuan, accounting for 222% of the quarterly plan.
2) By the end of March 2024, the Jihe Expressway renovation and expansion project had completed a total of 82.55% of roadbed projects, 47.67% of pavement projects, 76.3% of bridge construction projects, 44.05% of housing construction projects, 50.97% of traffic safety projects, 31.88% of greening projects, and 44.98% of mechanical and electrical engineering. After the renovation and expansion project is completed and opened to traffic, it is expected to usher in a double increase in traffic volume and toll standards. At the same time, the combined extension of the toll period will help enhance the medium- to long-term growth of the company's main road and bridge operation business.
The dividend policy is steady and emphasizes shareholder returns. 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%; when performance was under pressure due to the pandemic, the company guaranteed that the dividend per share would not decline.
According to the “Notice on Promoting the Company's “Improving Quality, Efficiency, and Weighing Returns” issued by the company, the company will continue to do a good job in investor returns and maintain the stability and continuity of dividends in the future. 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 8.92 yuan on April 29, 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, 38.32 and 4.231 billion yuan respectively in 2024-2026, with earnings per share of 0.74, 0.79, and 0.87 yuan, respectively. The current stock price is 8.92 yuan. The corresponding PE is 12.0X/11.3X/10.2X, 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.