Event: In 2023, the company achieved revenue of 15.19 billion yuan, a year-on-year increase of 14.6%, and net profit of 4.41 billion yuan to mother, an increase of 18.5% over the previous year. 24Q1 achieved revenue of 3.47 billion yuan, a year-on-year decrease of 4.3%. The decline in revenue was mainly due to a decrease in the carry-over scale of real estate projects of the subsidiary and a corresponding decrease in revenue during the construction period. Net profit to mother was 1.25 billion yuan, an increase of 1.6% over the previous year.

The base in '22 was low, and road production revenue in '23 was generally high: in '23, the company achieved toll revenue of 9.51 billion yuan, an increase of about 29.9% over the previous year, of which the Shanghai-Nanjing Expressway toll revenue was 5.25 billion yuan, an increase of 22.66% over the previous year. The company's road production revenue generally achieved high growth in 23, mainly due to the impact of the epidemic in the same period in '22 and the 10% reduction in truck tolls in 22Q4, which put pressure on revenue, and the base was low.

The average daily revenue of Wufengshan Bridge increased 146% year-on-year in '23, reaching 965 million yuan in annual revenue, and increased gross margin by 15.3 pcts to 63.4%, driving Wufengshan to reverse losses and achieve profit of 310 million yuan for the whole year (loss of 170 million yuan in the same period in '22). Among the other controlled road products, with the exception of the Zhenli Expressway and the Yichang Expressway, where the growth rate of the rest of the road products is lower, the revenue growth rate of all other road products is over 20%.

The company's operating costs increased by 28.3% in '23, mainly due to the large year-on-year increase in traffic volume in '23, where the company's costs were linked to traffic volume under the vehicle traffic depreciation law.

A number of road investment projects are progressing steadily: the company continues to integrate high-quality road projects in the province. Currently, 2 projects are under construction: 1. The Longtan Yangtze River Bridge and North Link Project is expected to be fully opened by the end of 2025. 2. The Xiyi Expressway Southern Section Expansion Project, which is expected to open in June '26, will greatly improve traffic capacity on the Xiyi Expressway.

There are 2 key projects in preparation: 1. The Shanghai-Nanjing high-speed capacity expansion project is currently being prepared; 2. The Xitai Expressway project is one of the nine crossroads of the Jiangsu Provincial Road Plan. The total planned investment of the project is about 242 billion yuan, and the company accounts for 50% of the shares.

In addition, the company plans to acquire 65% of the shares of Suxi Changnan Expressway Company held by Jiangsu Traffic Control to further improve the main business layout.

As the only listed road and bridge company in Jiangsu Province, the company can continuously obtain high-quality road construction projects, which helps the company improve its ability to operate continuously. This is one of the main reasons we are optimistic about the company.

Maintaining a steady dividend strategy, the dividend amount increased slightly: the company's dividend was 0.47 yuan per share in '23, a slight increase from 0.46 yuan in the previous year. The dividend amount accounted for 53.7% of net profit attributable to mother. For a long time, the company's dividends have followed two rules (unpromised, but this has been the case for a long time). One is that the dividend amount accounts for no less than 50% of the net profit to the mother, and the other is that this year's dividend amount is not lower than the previous year. It is expected that as the company's performance grows, the amount of dividends will gradually increase.

Profit forecast and investment advice: We expect the company's net profit for 24-26 to be 46.0, 49.3 billion, and 5.29 billion yuan, respectively, corresponding EPS of 0.91, 0.98 and 1.05 yuan, respectively, and corresponding to the current stock price PE of 12.1X, 11.3X, and 10.6X, respectively. The company is located in the core area of the Yangtze River Delta, has a natural geographical advantage, focuses on its main business and has strong continuous operation capabilities, and maintains the company's “recommended” rating.

Risk warning: New road production traffic falls short of expectations, changes in charging policies, etc.