Description of the event
The Ning—Shanghai Expressway disclosed the three-quarter report for 2023: in the first three quarters, the company achieved operating income of 11.61 billion yuan, an increase of 22.4% over the previous year; realized net profit of 4.04 billion yuan, an increase of 29.8% over the previous year; in the third quarter, the company achieved operating income of 4.47 billion yuan, a year-on-year decrease of 3.0%; and realized net profit of 1.55 billion yuan, an increase of 21.4% over the previous year.
Incident comments
Traffic has been steadily restored, driving rapid growth in the main business. 2023Q3, the company's highway toll business revenue was 2.57 billion yuan, an increase of 17.0% over the previous year. The main business maintained rapid growth under road network traffic restoration. Looking at core road production, traffic on the Jiangsu section of the Shanghai-Nanjing Expressway increased by 12.8% year-on-year, 3.2% over the same period in 2019, and traffic increased steadily. Traffic on the Ningchang Expressway/Jiangyin Bridge/Sujiahang Expressway/Yanjiang Expressway increased 25.8%/28.1%/15.0%/25.9% year on year, with most road production growing at over 20%.
The ancillary business increased year on year, and construction and real estate dragged down revenue. In 2023Q3, the company's construction revenue/supporting services/electricity sales/real estate sales/other revenue were 11.5/4.9/1.4/0.7/0.5 billion yuan respectively, with year-on-year changes of -5.6/+1.7/-0.1/-1.3/+0.2 billion yuan, respectively. Benefiting from the recovery in road network traffic, revenue from ancillary services increased year on year. Real estate delivery projects and road and bridge construction projects declined in the third quarter, leading to a year-on-year decline in real estate sales and construction revenue. The year-on-year decline in electricity sales was mainly affected by weather factors. The decline in wind speed in the third quarter led to a decrease in the feed-in capacity of offshore wind power projects. Other revenue increased significantly, mainly due to increased revenue from advertising and hotel services. The decline in construction and real estate revenue in the third quarter dragged down revenue. Excluding construction period revenue, the company's ancillary revenue increased by 500 million yuan year-on-year.
The performance in a single quarter reached a record high, and changes in fair value increased profits. 2023Q3, the company's gross profit increased by 100 million yuan to 1.76 billion yuan over the same period last year, mainly to improve the profit of expressway tolls and ancillary business for traffic restoration. Q3 The company's expenses for the period increased by 0.7 million yuan to 4.1 billion yuan year on year, of which financial expenses increased by 0.8 billion yuan year on year. Q3 Investment income increased by $0.8 billion year over year, and profit and loss from changes in fair value increased by $220 million year over year. In the end, the company's net profit increased by 270 million yuan to 1.55 billion yuan year-on-year, the highest profit in a single quarter.
Capital expenditure declined seasonally, and operating cash flow improved. In 2023Q3, the company's capital expenditure was about 1.21 billion yuan, a year-on-year decrease of 34.5%. In 2023Q3, the company's net operating cash flow was 1.92 billion yuan, up 13.7% year on year. Traffic recovery contributed to improved cash flow.
Profit release can be expected, with both steady growth and high dividends. After the epidemic, the company's profit returned to an upward channel. Q3 recorded the highest performance in a single quarter in history. As road network traffic continues to recover, the company's profits are expected to continue to be released. The company actively lays out high-quality road properties and has long-term growth potential. At the same time, the company continued its good policy of high dividends, and the cost performance ratio of allocation was highlighted in a low interest rate environment. The company's net profit from 2023-2025 is estimated to be 46.5/49.3/5.29 billion yuan respectively, corresponding to PE of 10.9/10.3/9.6 times, reaffirming the “buy” rating.
Risk warning
1. Traffic restoration falls short of expectations;
2. The increase in road production traffic fell short of expectations.