内生增长：中部崛起，核心路产改扩建+打通“断头路”提振车流量腹地经济活跃，路网效应持续增强，驱动车流量提升。中部崛起，安徽省规划到2027 年省内高速公路通车里程超过7500 公里，居长三角第1 位。Key points of investment
It is the only highway listed company in Anhui Province. Strong profitability supports a high dividend rate of 60%, focuses on the strong foundation of the main business, and has the dual advantages of profitability and return on reinvestment. The company has 10 operating sections in Anhui Province, with a total operating mileage of 609 kilometers, and an average remaining charging period of about 22 years. In 2010-2023, toll revenue accounted for more than 90% of operating income (excluding revenue during the construction period). The gross margin remained around 60%, the net interest rate was close to 40%, and the weighted average ROE in 2023 was 13.5%, leading the industry in profitability. The cost of the company's renovation and expansion per kilometer is at a low level, which has the advantage of return on investment.
The current dividend rate is about 4%, and there is potential for high dividends to increase in the future. The company promises a dividend rate of no less than 60% for 21-23, which is expected to increase further in the future. Currently, the highest dividend rate among peers is 70% of Guangdong Expressway.
Endogenous growth: The rise of central China, the transformation and expansion of core road production and the opening of “guillotine roads” boosted traffic and the active economy in the hinterland. The road network effect continued to increase, driving traffic flow growth. With the rise of central China, Anhui Province plans to open more than 7,500 kilometers of highway traffic in the province by 2027, ranking first in the Yangtze River Delta.
The core roads are being renovated and expanded one after another, and the toll period is expected to be extended by 25-30 years.
1) The renovation and expansion of the Hening Expressway was completed at the end of 2019. The actual investment amount was 3.6 billion yuan (0.04 billion yuan/km), and the charging period is expected to be extended for 25 years. 2) The renovation and expansion of the Xuanguang Expressway is expected to be completed by the end of 2024, with an estimated investment of 13.8 billion yuan (0.15 billion yuan/km), which is expected to be extended for 30 years. 3) The renovation and expansion of the Highland Expressway is expected to begin by the end of 2024, with an estimated investment of 11.5 billion yuan (over 0.1 billion yuan/km).
Open up the “guillotine road”, and the road network effect will drive traffic to increase. 1) The Ningxuan-Hangzhou Expressway was fully completed at the end of '22. The average daily traffic volume was +156% compared to the same period in '23, the toll was +190% compared to the same period, and the gross margin changed to 1.1%. 2) The Yuewu Expressway was fully completed in October '23. Tolls in November-December were +82% year-on-year, and gross margin changed to 2.3% for the whole year.
Outbound development: The acquisition of two sections of road products was completed in 2021, seeking the possibility of acquiring high-quality road products in the province. In 2021, 100% of the shares in the Anhui section of the Yuewu Expressway and the Anqing Yangtze River Highway Bridge were acquired for 2.2 billion yuan. The remaining toll period was 21 or 9 years, and the toll revenue in 2023 accounted for 8% and 4%.
The 2023 acquisition of Liuwu Expressway transaction plan was not approved by the shareholders' meeting. In April 2023, the company plans to acquire 100% of the shares of Liuwu Express, a major shareholder, with a transaction consideration of 3.666 billion yuan (issuing A shares at a price of 6.64 yuan/share to pay 3.116 billion yuan and 0.55 billion yuan in cash). The toll mileage of the Liuwu Expressway is 92.7 kilometers. If the transaction is completed, the company's operating mileage will be increased by 15%; the remaining toll period is 15.4 years; toll revenue in 2022 is 0.52 billion yuan, net interest rate is 41.4%, and there are no interestable liabilities.
Profit forecasting and valuation
The company's net profit for 24-26 is estimated to be 1.6, 1.77, and 1.85 billion yuan, or -3.5%, +10.2%, and +4.8% year-on-year. The current dividend rate is about 4%. The company has high dividends and the potential to increase it, has absolute revenue allocation value, and is covered for the first time, giving it an “increase in wealth” rating.
Risk warning: The macroeconomic growth rate falls short of expectations, traffic volume falls short of expectations, etc.
