occurrences

Recently, Zhongyuan Expressway released its 2023 annual report. During the reporting period, we achieved total operating income of 5.7 billion yuan, a decrease of -23% over the previous year; net profit of 830 million yuan, an increase of +489.7% over the previous year; earnings per share of 0.3176 yuan, a weighted average return on net assets of 6.68%; a cash dividend of 0.149 yuan (tax included) per share based on total share capital at the end of the year 23; and a dividend rate of 4.0% based on the closing price on April 11.

The company released its 2024 Q1 quarterly report, achieving total revenue of 1.09 billion yuan, a decrease of -9.1% over the same period last year; net profit to mother was 284 million yuan, a year-on-year decrease of -26.4%. The reason for the decline in Q1: Toll revenue declined year-on-year due to factors such as bad weather such as rain, snow, freezing rain, and haze in Henan, and an increase in the number of free days for minibuses during the Spring Festival holiday.

reviews

The company's main business is in the following two categories:

The transportation sector achieved revenue of 4.62 billion yuan during the reporting period, accounting for 81.0%; operating profit of 2.32 billion yuan, accounting for 97.4%. During the reporting period, the total operating mileage was about 808 km, of which the four-lane mileage of the expressway was about 567 km, the six-lane mileage was about 16 km, and the eight lanes was about 209 km. The main road products have good assets, strong profitability, and outstanding properties of cash cows.

Diversified businesses, including investing in real estate companies, new energy companies, financial companies, etc.

Revenue and profit contributions both account for a small share. The company disclosed that it passed an internal equity transfer bill on May 30, merging a number of real estate companies into wholly-owned third-level subsidiaries of the company. Due to the transfer of shares in subsidiaries within the scope of the merger, there is no change in the scope of the consolidated statement.

In order to control the size of debt, through the company's continuous efforts, the total debt at the end of '23 was 35.297 billion yuan, down 4.86% from the end of the previous period; the balance ratio was 70.51%, down 4.09 percentage points from the end of the previous period.

Recently, the company's exchanges with technology companies have gradually increased. It is expected that in the future, the company's digital transformation and new energy application scenarios will accelerate.

Investment ratings

The company's profit distribution in '23 increased compared to previous years, sending a signal of emphasis on shareholders' interests and positive returns. Combined with the increase in performance brought about by the completion of projects such as Zheng Luo, future dividends are worth looking forward to.

We covered it for the first time and gave it an “gain” rating.

Risk warning

The macroeconomic downturn has caused traffic to fall short of expectations; there are risks such as adjustments to high-speed toll policies.