Investment highlights

It once again covered Shenzhen International (00152) to give it an outperforming industry rating. The target price is HK$7.61, which corresponds to the 2024/2025 dividend rate of 7.5%/9.9%. The reasons are as follows:

The South China Logistics Park was transformed and implemented, and land value was released again. The company signed a land preparation supervision agreement with the Shenzhen Longhua District Government for the first phase of the South China Logistics Park land preparation project. According to the agreement, the South China Logistics Park Company will receive 1.058 billion yuan in demolition compensation and 0.1087 million square meters of reserved land use rights (volume area of about 0.6942 million square meters). Referring to the Qianhai project, we estimate that the land value added and residential development revenue of the South China Logistics Park project is expected to reach 13.2-15.5 billion yuan The release dimension is the next 6-8 years.

Recurring business profits are generally stable. 1) Toll roads and environmental protection: Mainly operated on the Shenzhen Expressway, which is the company's basic profit market, we believe that the traffic performance of the Yanjiang Phase II is expected to increase steadily this year; 2) Logistics Park and Logistics Services: Logistics Park revenue CAGR 17.9% in 2017-2023. According to the company announcement, there are about 1.534 million square meter logistics ports to be put into operation in 2024-2025, which we believe is expected to support the logistics park business to continue to unleash growth; in 2024, it is expected that public REITs will be released to increase profits.

The dividend policy is steady, and the dividend rate is attractive. The company's dividend policy is steady. The company's cumulative dividend for 2013-2023 is HK$15.65 billion, with an average dividend ratio of 51.0% in the past five years. Based on this year's profit forecast (including our estimate that the South China Logistics Park will release land value-added revenue of about HK$2/3.1 billion this year and next year), assuming a 50% dividend ratio, the current price corresponds to a 2024/2025 dividend rate of 9.0%/11.8%, which is highly attractive.

What is our biggest difference from the market? The market is concerned about the sustainability of the company's dividends. We believe that the South China Logistics Park's land appreciation and development and operation revenue may be released over the next 6-8 years, and that the company's dividend policy has been steady in the past. Despite a mismatch between cash flow and profit terms, the company is still able to maintain the dividend ratio.

Potential catalyst: South China Logistics Park Phase I land transformation benefits confirmation.

Profit forecasting and valuation

We expect the company's 2024-2025 EPS to be HK$1.13/HK$1.49 and CAGR of 37.0%, respectively.

The current price corresponds to 5.6/4.2 times P/E for 2024/2025. We used the dividend rate method for valuation. The current price of the H share highway sector corresponds to an average dividend rate of 7.5% in 2023. Compared with this dividend rate, the company was given a target price of HK$7.61, corresponding to the 2024/2025 dividend rate of 7.5%/9.9%. We once again covered Shenzhen International to give it a rating of outperforming the industry, and there is room for an increase of 20.8% compared to the current price.

risks

The economic growth fell short of expectations, the price or progress of the South China Logistics Park fell short of expectations, and real estate sales fell short of expectations.