The company released its 2024 semi-annual report: 24H1 achieved revenue of 3.22 billion yuan, a year-on-year decrease of 7.2%, and net profit to mother of 0.63 billion yuan, a year-on-year decrease of 14.3%, after deducting non-net profit of 0.65 billion yuan, an increase of 9.1% year-on-year. Among them, Q1 revenue was 1.56 billion yuan, up 0.2% year on year, net profit to mother was 0.39 billion yuan, down 7.65% year on year, after deducting non-net profit of 0.383 billion yuan, up 22.4% year on year; Q2 revenue was 1.661 billion yuan, and net profit to mother was 0.236 billion yuan, down 23.48% year on year, after deducting non-net profit of 0.268 billion yuan, down 5.6% year on year.

The main highway business remained steady, and gross profit increased year-on-year. The 24H1 Expressway toll revenue was 1.78 billion yuan, the same as the same period last year. Compared with the same period last year, the toll revenue for each month was roughly the same. The latest July toll revenue was also the same. Highway toll costs were 0.67 billion yuan, a year-on-year decrease of 6.6%; the gross profit margin for expressway tolls was 62.16%, up 2.6 percentage points from the same period last year, and gross profit was 1.1 billion yuan, up 4.1% year on year. The number of free holidays in the first half of '24 increased compared to the same period last year, and Jiangxi and other regions experienced a lot of rain and snow in the first half of the year, which had an impact on the public's willingness and efficiency to travel. In this context, the company's toll business revenue is still maintained, and cost optimization and gross profit increase are driven by improved operating efficiency, which is a reflection of the company's road production resilience and high operating efficiency.

Other businesses are developing steadily, and changes in the fair value of transactional financial assets are the main reason for the decline in performance. 1) Fangxing Company (smart transportation business) achieved net profit of 38.3118 million yuan, compared to 46.3317 million yuan in the same period last year, a year-on-year decrease of 17%. We analyzed that the main reason for this decline in performance was due to differences in the timing of sales revenue confirmation, and it is expected to return to normal in the second half of the year. 2) Industrial development (gas station & real estate business) achieved net profit of 70.2943 million yuan, compared to 64.4757 million yuan in the same period last year, an increase of 9% over the previous year. 3) Net profit from the financial investment business was 31.6201 million yuan, or 29.6085 million yuan in the same period last year, up 6.8% year on year. Profit and loss from fair value changes generated by 2024H1 transactional financial assets - 66.351 million yuan, was the main reason for the decline in performance. (Mainly due to changes in the fair value of the company's participation in the listed company Guosheng Financial Holdings in the current period)

We emphasize that the company has clear room for optimization and that the value of assets is undervalued. Highlight 1: We believe there is clear room for improvement in financial expenses. As the company's past few high-interest bonds expire, financial expenses will be significantly optimized.

In 2024, the 2.3 billion yuan 14 Ganyue 02 (interest rate is 6.09%) will expire, and interest rates on ultra-short-term financing notes recently issued by the company will continue to decrease, leading to continuous optimization of financial expenses. 2024H1's financial expenses were 0.185 billion yuan, a year-on-year decrease of 20 million yuan, or 10.1%. Highlight 2: The remaining charging period for the company's core road products is long. The renovation and expansion have unleashed new growth potential, and the value is undervalued. The remaining toll periods for the Changjiu Expressway and Changzhang Expressway have reached 25 and 19 years respectively; construction of the Zhangji section of the Changtai Expressway officially commenced in 2022. The Changjiu Expressway achieved revenue expansion after the renovation and expansion of the Changtai Expressway. After the completion of the renovation and expansion of the Changtai Expressway, the north-south corridors in Jiangxi Province will all have eight lanes, improving traffic efficiency and helping to further develop the road network connectivity effect.

Investment advice: 1) Profit forecast: We maintain the company's profit forecast for 2024-26, that is, the estimated net profit to be realized is 1.3, 1.41, and 1.48 billion yuan, respectively, and the corresponding EPS is 0.56, 0.6, and 0.63 yuan, respectively, and the corresponding PE is 8, 8, and 7 times, respectively. 2) Target price: We give the company an estimated net profit of 10 times PE in 2024, corresponding to a target market value of 13 billion yuan and a target price of 5.61 yuan. We expect 20% of the space compared to the current price, maintaining a “strong push” rating.

Risk warning: The progress and results of the renovation and expansion fall short of expectations; the increase in traffic falls short of expectations.