Jiangxi is the only highway listed company, which mainly controls the quality of road products. 1) the company's main business includes highway, intelligent transportation, industrial investment and financial investment. In 2022, the company's income was 6.758 billion yuan, of which vehicle toll income accounted for 50%, refined oil products and real estate business accounted for 24% and 7% respectively, and intelligent transportation accounted for 18% of industrial investment. Gross profit structure: vehicle traffic services accounted for 75%, oil products business accounted for 11%. 23H1 has an income of 3.471 billion yuan, a net profit of 732 million yuan, and a non-net profit of 600 million yuan, which is + 9.9% compared with the same period last year. 2) the company's main control road products are of high quality, connecting the south to the north, connecting the east to the west, and the gross profit margin is relatively ahead of the industry. The three main roads Changjiu, Changzhang and Changtai Expressway account for more than 70% of the toll income. The gross profit margin of 23H1 toll business is 59.6%, including Changtai 73.6%, Changjiu 71%, Changzhang 58%, which is not inferior to the level of the leading company in the industry (such as Guangdong Expressway 68.6%, Nanjing-Shanghai Expressway 64.5%, Wantong Expressway 64%, Sichuan Chengdu-Chongqing 61.7%, Shandong Expressway 57.7%, China Merchants Highway 47.8%).

We are optimistic that the company has core competitive advantages and there is room for continuous improvement in performance. 1) the core advantage of the company's main business: the remaining fee life is long, and the reconstruction and expansion release the brand-new growth potential. A) the remaining toll years of Changjiu Expressway and Changzhang Expressway are 26 years and 20 years and 6 months respectively; the reconstruction and expansion project of Changtai Expressway Zhangji Section was officially started in 2022. B) Reconstruction and expansion unleashed new potential: Changjiu Expressway realized income expansion after reconstruction and expansion. Changjiu completed its transformation and expansion in 2019, and toll revenue in 2021 increased by 66% compared with 2013 before the transformation and expansion, and 46% over 2019. At present, Changtai Expressway has started reconstruction and expansion. After completion, Changjiu Expressway, Changzhang Expressway and Changtai Expressway in Jiangxi Province are all eight lanes, improving traffic efficiency, and we expect to give further play to the effect of road network connectivity. 2) We believe that there is clear room for improvement in the company's gross profit margin and financial expenses. A) changes in accounting estimates result in a reduction in depreciation, thereby increasing profits. The company adopts the workload method to calculate depreciation, and since January 23, it has been calculated according to the newly determined depreciation amount per unit of traffic flow. the accounting estimates that the change will increase the company's net profit in the first half of 23 years by 73 million yuan. B) Financial costs are expected to continue to decrease With the maturity of the company's past several high-interest-rate bonds, financial expenses will be significantly optimized. In 2024, 14 Ganyue 02 with an interest rate of 2.3 billion yuan (with an interest rate of 6.09%) will expire, while the interest rates on ultra-short-term financing bills recently issued by the company have been falling, such as 23 Ganyue SCP004 (1.81% with a maturity of 90 days). According to a simple calculation, we expect to save about 80 million of financial costs on an annualized basis.

Investment advice: 1) profit forecast: we estimate that the company's return net profit in 2023-25 is 11.5,12.9 and 1.39 billion respectively, the corresponding EPS is 0.49,0.55 and 0.6 yuan respectively, and the corresponding PE is 8.0,7.1,6.6 times respectively. 2) from the perspective of the analysis framework of the five elements of Huachuang Transportation, we think that Jiangxi and Guangdong have several characteristics: a) from the perspective of regional economic potential, the GDP growth rate of Jiangxi Province is higher than the national average, and it is in the central position of strategic significance. B) from the point of view of sustainable development: the reconstruction and expansion of the company's core road products has been successful, and the remaining years of charging has been ahead of the industry. C) Modern corporate governance system: after the actual controller becomes the SASAC of Jiangxi Province, it is expected to deepen the reform and system construction. In particular, at present, the dividend ratio of the company is relatively low, and we think there is some room for improvement in the future. 3) Target price: the company's current PB is only 0.5 times, which is significantly lower than the industry average (1.3times for companies with a market capitalization of more than 10 billion), but we think that the company's road products are of high quality and have potential, and have room for market capitalization repair from the perspective of special valuation. Based on the fact that the gross profit level of the core road products is not weaker than that of the head enterprise, we give the company 11 times the expected net profit in 2023, corresponding to the target market capitalization of 12.6 billion. The target price is 5.4 yuan, which is expected to be 37% more than the current price, giving a "strong push" rating for the first time.

Risk hint: the progress and effect of reconstruction and expansion are not as expected, and the growth rate of traffic flow is not as expected.