Reviewing stock price changes since 23 years on the Ninghai-Shanghai Expressway, excluding market factors, the main factors affecting changes in individual stock prices include mergers and acquisitions, road property renovation and expansion, changes in traffic and performance, and dividend policies. The ROE of the Ninghu-Shanghai Expressway basically remained at 12%-16%. From 2015 to 2019, the company's ROE increased year by year, and the company's profitability was rising. The main reason was that the company continued to promote project investment in 2015-2018, successively acquired shares in companies such as Ningchang Zhenyi and Xiyi Company, and mergers and acquisitions and self-construction projects formed effective profit support for the company.

It is the only listed high-speed company in Jiangsu Province, and the trend of asset securitization can be expected in the context of “debt conversion.” The Ninghu-Shanghai Expressway is the only listed road and bridge company in Jiangsu Province. The two places are listed and traded in three places, and the number of road and bridge projects directly involved in operation and investment has reached 18. The company's business is “one core and multiple”, with the toll road business as the core, and overall revenue and profit are growing steadily.

The booming development of the regional economy has enabled a high increase in traffic, and high-quality lines are “strong and strong”. The core road products of the Ninghai-Shanghai Expressway are located in the Yangtze River Delta region. The road and bridge project owned or participated in by the company is a major road and bridge project connecting the east-west and north-south land traffic corridors in Jiangsu Province. The core asset is the Jiangsu section of the Shanghai-Nanjing Expressway connecting 6 large and medium-sized cities of Shanghai, Suzhou, Wuxi, Changzhou, Zhenjiang and Nanjing. It is one of the busiest highways in China. The core location advantages guarantee traffic growth. Structurally, the growth trend of bus and truck traffic on the Shanghai-Nanjing Expressway is divided, and passenger traffic is growing rapidly. At the same time, the high number of cars owned in Jiangsu Province is also driving the increase in traffic on the Shanghai-Nanjing Expressway.

The assets of the Ninghai-Shanghai Expressway are high quality, and overall costs, expenses and capital expenses are manageable, and there is still room for improvement in the dividend ratio compared to peers. The company's asset size has grown steadily, the balance ratio remains below 50%, and the operating cash flow is sufficient to meet the company's capital expenditure requirements. At the same time, the company's overall costs have remained stable, which is comparable to the growth rate of vehicle traffic. In terms of shareholder returns, the company's total dividends are stable, and high dividends guarantee shareholder returns. Compared with peers, there is still room for improvement in the dividend ratio in the future.

First coverage, giving a “buy” rating. We expect the company's 24-26E net profit to be 4.58, 5.169, and 5.719 billion yuan, respectively, up 4%, 13%, and 11% year-on-year, respectively. The corresponding PE is 16x, 14x, and 13x, respectively. Ninghai-Shanghai Expressway has a core location advantage. Traffic has been growing steadily year by year, and revenue and profit have maintained a stable trend in recent years. The company's future operating stability has a strong advantage. We use the FCFF valuation method to estimate the company's reasonable valuation range. According to FCFF's valuation, the company's reasonable market value is about 96.01 billion yuan. It is estimated that the company's target price is 19.06 yuan, which corresponds to the closing price on December 18, 2024, with room for an increase of about 30%. First coverage, giving a “buy” rating.

Risk warning: Fee standards reduce risk; force majeure; competitive lines cause traffic to shift.