Key points of investment

Wantong Express: Net profit of 0.81 billion yuan in the first half of the year, -3.5% YoY. In the first half of 2024, the company achieved operating income of 3.05 billion yuan, +31% year-on-year, mainly due to the year-on-year increase of 0.885 billion yuan in construction service revenue for the Xuanguang renovation and expansion PPP project; net profit to mother of 0.81 billion yuan, net profit of non-return to mother of 0.8 billion yuan, compared to -9% year-on-year, mainly due to insufficient effective domestic demand and many days of bad weather in the first half of the year. Road network changes, etc. Among them, in 24Q2, operating income was 1.77 billion yuan, +50% year over year, net profit to mother was 0.35 billion yuan, -8% year over year, after deducting non-return net profit of 0.37 billion yuan, or -11% year over year.

Q2 toll revenue was -9.1% year-on-year. The Ningxuanhang and Yuewu Expressway benefited from the road network penetration revenue side: 24H1. The company achieved toll revenue of 1.92 billion yuan, a year-on-year decrease of 8.5%, mainly due to insufficient effective domestic demand, policy relief, road network changes, too many days of bad weather, and the impact of renovation and expansion construction.

Among them, Q1 and Q2 toll revenue were 1.02 billion yuan and 0.9 billion yuan respectively, -8% and -9% year-on-year respectively.

1) The core road production, the Hening Expressway, performed relatively steadily. The average daily traffic volume for 24H1 was -3.3% year-on-year, and toll revenue was -2.6%.

2) The Xuanguang and Guangci expressways were affected by the renovation and expansion, especially the one-way traffic policy implemented on March 8, resulting in average 24H1 daily traffic volume of -53% and toll revenue of -58% year-on-year.

3) Traffic volume on the 24H1 Expressway was -13% year-on-year, mainly due to the completion of the entire Anhui section of the Shanghai-Wu Expressway, which caused a certain amount of diversion.

4) Traffic volume of 24H1 on the Anhui section of Ningxuanhang Expressway and Yuewu Expressway was +75%, +73%, and toll revenue was +74% and +68% year-on-year, mainly due to the significant increase in traffic and toll revenue due to the full line penetration effect after the “guillotine road” was opened.

Cost and expense side: 24H1. The operating cost of the toll road business was about 0.75 billion yuan, +0.6% compared with the same period last year, and the performance was stable. Financial expenses of 0.032 billion yuan, -38% year-on-year, were mainly due to lower interest rates on stock loans and increased interest income on deposits. Earnings from changes in fair value were 0.95 million yuan, compared to -70.8 million yuan in the same period last year.

Profit forecasting and investment advice

After the completion of the renovation and expansion of the Xuanguang Expressway, it will drive traffic to recover and grow. We expect the company's net profit to be 1.6, 1.77, and 1.85 billion yuan respectively in 24-26, maintaining a “buy” rating.

Risk warning:

Demand fell short of expectations, and oil prices and exchange rates fluctuated greatly.