Brief performance review

On October 29, 2024, the Ninghai-Shanghai Expressway released its report for the third quarter of 2024. 2024Q1-Q3 achieved operating income of 14.06 billion yuan, an increase of 21.1% year on year, and realized net profit of 4.12 billion yuan to mother, an increase of 2.1% year on year. Among them, Q3 achieved operating income of 4.1 billion yuan, a year-on-year decrease of 8.4%; realized net profit to mother of 1.37 billion yuan, a year-on-year decrease of 11.8%.

Management analysis

Revenue increased during the construction period, and revenue from the company's main business increased. 2024Q1-Q3's revenue increased 21.1% year over year, mainly benefiting from increased investment in road and bridge construction projects. Excluding the factors influencing revenue during the construction period, the company's revenue fell 2.33% year on year, mainly affected by the decline in oil sales and the year-on-year decrease in real estate delivery scale. 2024Q1-Q3, the company's net profit to mother increased 2.1% year on year, mainly due to the year-on-year increase in the operating performance of joint ventures, and also benefited from factors such as increased toll revenue, lower financial expenses, and asset disposal income due to the cessation of toll charges on the LuMa First Class Highway.

Gross margin increased year over year, and investment income declined year over year. In 3Q2024, the company achieved a gross profit margin of 47.1%, an increase of 7.8pct year-on-year, mainly due to a year-on-year decrease in revenue during the construction period with zero gross profit. In terms of the cost ratio, the 3Q2024 company's expense ratio for the period was 7.57%, down 1.51 pcts year on year, of which the management expense ratio was 1.53%, up 0.22 pct year on year; the financial expense ratio was 6.00%, down 1.71 pct year on year, mainly due to the company's reduction in interest rate on interest-bearing liabilities.

3Q2024 achieved investment income of 0.299 billion yuan, a year-on-year decrease of 41%, mainly due to Bank of Jiangsu Corporation's dividend schedule earlier than in 2023 (July dividend completed in June), and earnings were confirmed earlier in Q2.

It is proposed to invest in the construction of the Danjin Expressway. In order to promote the sustainable development of the company's highway business, the company plans to invest in the construction of the Danjin Expressway (Danyang-Jintan section of the Funing-Liyang Expressway). The initial design estimate for the project is RMB 14.563 billion, and the total investment of the construction drawing budget is about RMB 13.412 billion, and the project capital accounts for 40% of the total investment. The initial registered capital of the project company was RMB 1.704 billion, and the company invested RMB 1.27118 billion, with a share ratio of 74.6%. The total length of the project route is 41.35 kilometers. The Danjin Expressway is connected to the Zhendan Expressway in the north, and the Wufengshan Bridge to the south, and the Changli Expressway. As an important part of the G4013 Yangzhou-Yueqing Expressway, this channel has strong potential for development. The project connects the two main horizontal passageways of the Shanghai-Nanjing Expressway and the Ningchang Expressway. It will improve the traffic capacity and efficiency of the entire regional transportation network and lay the foundation for future traffic volume and toll revenue on the project road itself.

Profit Forecasts, Valuations, and Ratings

Maintain the company's 2024-2026 net profit forecast of 4.62 billion yuan, 5.42 billion yuan, and 6.2 billion yuan, maintaining a “buy” rating.

Risk warning

Economic restoration falls short of expectations, progress of ongoing construction falls short of expectations, changes in highway toll policies, risk of market style changes