Road stocks lead gains. As of press time, Shenzhen Expressway (00548) rose 3.98%, reporting HKD 7.57; Anhui Expressway (00995) rose 3.96%, reporting HKD 9.72; Jiangsu Expressway (00177) rose 3.65%, reporting HKD 8.1; Zhejiang Expressway (00576) rose 2.47%, reporting HKD 5.4.

HTSC pointed out that the profitability of highways has a weak cyclical property and the growth rate of vehicle flow in April and May was flat. According to the Planning and Design Institute of the Ministry of Transport, the year-on-year change in traffic volume of mainline highways in April and May was 0%/-3% for passenger cars/freight cars. Taking into account the increase of 2Q exempt from small passenger car tolls compared to the same period last year, it is estimated that the net profit of the highway sector will decrease by about 3% year-on-year in 2Q, while the operating conditions will remain flat (with a decrease of 3% year-on-year in 1Q net profit).

China Post Securities pointed out that the revision of the Regulations on the Management of Toll Roads may gradually be put on the agenda. At present, the remaining operating period of listed expressway companies on road assets averages about 12 years. If the future franchise period of newly built and expanded road assets can be extended to a maximum of 40 years, it will be beneficial to the sustainable operation capability of the main business of listed expressway companies. The bank believes that high-quality listed companies in the long-period highways and railways segments with both weak cyclicality and high dividend characteristics still have the potential for excess returns.