The revised “Administrative Measures on Infrastructure and Utility Franchises” was issued and implemented on May 1.
The revised “Administrative Measures on Infrastructure and Utility Franchises” was issued and implemented on May 1.
The agency believes that if the “Toll Road Administration Regulations” follow the “Measures” and raise the operating period, the yield of highway renovation and expansion projects is expected to increase, and the long-term value of highway companies is expected to increase. Companies with short term, low PE, and expansion plans have relatively benefited. The overall PE valuation of Hong Kong stock highways is lower than that of A-share highways, or more cost-effective.
The “Decision of the CPC Central Committee on Further Comprehensive Deepening Reform and Promoting Chinese-style Modernization” mentions deepening the reform of the integrated transportation system, advancing the reform of the railway system, developing general aviation and the low-altitude economy, and promoting the optimization of toll road policies.
Changjiang Securities released a research report stating that going back to its roots, it is difficult for China's expressway industry to achieve balance of payments for a long time under excessive construction costs, and debt exposure continues to expand. Combined with rising local financial pressure over the past few years, a breakthrough in the current 30-year toll period policy may be imperative.
Although the impact at the practical level is limited, the introduction of the 2024 version of the “Administrative Measures” has brought a clear policy signal, and a substantial breakthrough in expressway toll periods is gradually approaching.
As the toll period is extended, the pain points that make it difficult for the industry to operate are gradually alleviated, and the highway sector is expected to usher in a double recovery in valuation and performance.
Companies related to the expressway concept:
Chengdu Expressway (01785), Anhui Wantong Expressway (00995), Sichuan-Cheng-Chongqing Expressway (00107), Jiangsu Ninghu Expressway (00177), Qilu Expressway (01576), Huayu Expressway (01823), Zhejiang Shanghai-Hangzhou Expressway (00576).