[CMIE_Shangsugong MM Road A Series Ry] China's comprehensive highway investment and operation service provider with the longest investment and operating mileage, the widest coverage area, and the most complete industrial chain. As of the end of June 2023, the total road production mileage invested and operated by China Merchants Highway reached 1,3060 kilometers, ranking first among operating expressway companies. The company's equity mileage is 3,659 kilometers, and the management mileage reaches 2008 kilometers. The investment and operation road network covers 22 provinces, autonomous regions and municipalities directly under the Central Government, and is mostly distributed in economically developed and densely populated regions.
The company's business situation is steady, the cost side is stable, and the increase in traffic volume boosts profits. The company's revenue for the first three quarters of 2018 to 2023 was 67.59/81.85/70.69/86.26/82.97/6.575 billion yuan, respectively, and net profit attributable to mother was 39.1/43.27/22.23/49.73/48.61 billion yuan, respectively. China Merchants Highway's main business revenue includes investment and operation, transportation technology, smart transportation, and China Merchants Ecology. According to the 2023 semi-annual report, each business accounted for 72.89%/19.57%/4.74%/2.80%, respectively.
In 2022, through the merger and acquisition of the Beijing-Taiwan Expressway, the scale of road production controlled by the company further increased; in 2022, toll revenue declined year on year, but road production operation efficiency was still at a high level; since 2023, the increase in passenger and freight demand led to a significant increase in the company's road traffic, and toll revenue increased sharply year over year; in addition, the transportation technology business, intelligent transportation business, and transportation ecology business also made a good complement to the main business revenue.
The company's future dividend ratio is not less than 55%, and a high dividend ratio enhances investor returns. China Merchants Highway's actual dividend ratio for 2020-2022 was 49.20%, 42.99%, and 52.68%. In April 2023, China Merchants Highway released the “Shareholder Return Plan for the Next Three Years (2022 to 2024)”, promising that when the company's financial and cash situation is good and there are no major investment plans or cash expenses, etc., the profit will be distributed by means of cash dividends not less than 55% of the net profit achieved to the mother in the current year.
Profit forecast and company rating: We are optimistic that economic recovery will bring about an elastic recovery in traffic. The company's road network is the largest in the country, and the company's multiple businesses go hand in hand. We are optimistic about the revenue growth brought about by the recovery; the cost side is stable, increasing the company's profit level. We expect the company's net profit for 2023-2025 to be: 5.03 billion yuan/6.02 billion yuan/6.43 billion yuan, corresponding to PE of 13.8/11.6/10.8, which gives the company a “buy” rating for the first time.
Risk warning: the risk of changes in the macroeconomic environment, the risk of policy changes.