Introduction to this report:
The ROE of the Wantong Expressway rebounded to a ten-year high in 2023, and the performance remained flat year-on-year under the 2024Q1 high base. The company is operating steadily. It is expected that the high dividend policy will continue, and high dividends can definitely be expected. The 2024 market risk appetite determines the space.
Key points of investment:
Maintain an increase in holdings rating. Wantong Express invests in and operates some road products in Anhui Province, and the location advantage is obvious.
The company's ROE rebounded to a ten-year high in 2023, and its performance remained flat year-on-year under the 2024Q1 high base.
Maintain the 2024-25 EPS forecast of 1.11 and 1.21 yuan, and add the 2026 EPS forecast of 1.27 yuan. High dividends are expected to continue. Assuming that 60% is maintained, the 2024 dividend rate is estimated at 7.7%. Maintain target price of HK$10.81. It suggests that market risk appetite determines valuation space.
Major road products were broadened in 2023, driving a significant increase in traffic and performance. In 2023, the company's revenue increased 27% year on year, net profit to mother increased nearly 15% year on year, and net profit after deducting non-net profit increased 22% year on year. Among them: 1) Tolls increased nearly 10% year on year, and traffic growth rate on some sections of the road was higher than the rate of toll growth due to the release of suppressive demand for buses after the epidemic; 2) Tolls on the core road production Hening Expressway increased by more than 19% year on year, benefiting from the completion of the connected Heliuye Expressway renovation and expansion at the end of 2022, traffic conditions improved on the Anhui section of the G40 Shanghai-Shaanxi Expressway, and traffic volume increased 41% year on year; 3) The Ninghangxuan Expressway was fully completed by the end of 2022. Convenient interregional transportation between Jiangsu and Zhejiang Province is expected to increase traffic volume by 156% year on year. It continues to manifest.
The 2024Q1 company operated steadily, with a slight decrease in non-net profit deductions due to a high base and a free Spring Festival increase. In the first quarter of 2024, the company's revenue increased 12% year on year; net profit after deducting non-net profit fell 7.6% year on year, in line with high base expectations; net profit to mother was 450 million yuan, the same year on year, benefiting from the dividends of the CICC Anhui Traffic Control REIT Fund. 1) Traffic volume of 2024Q1 decreased by 9% compared to the high base figure after the 2023Q1 epidemic, and toll revenue decreased 8% year on year. 2) The company was exempted from paying RMB 124 million for the nine days of the 2024 Spring Festival, and RMB 73 million for the seven days of the 2023 Spring Festival. 3) The Xuanguang Expressway was affected by the renovation and expansion. 2024Q1 traffic decreased by 34% year on year, and the impact on toll revenue was quite obvious.
High dividends will continue, and high dividends can definitely be expected. The company plans to distribute cash dividends of RMB 0.601 per share in 2023, with a dividend rate of 60.05%. The company's ROE rebounded to a ten-year high in 2023, and the long-term center stabilized at 10%-13%, leading the industry. The company's last shareholder return plan expires in 2023. Considering the company's emphasis on reinvestment management and shareholder returns, it is expected that high dividends will continue. If the 60% dividend rate is maintained, the dividend rates for 2024-26 are expected to be 7.7%, 8.4%, and 8.7%.
Risk warning: economic fluctuations, industry policies, reinvestment risks, market style changes, etc.