Incidents:

On August 12, 2024, Wuzhou Transport released its 2024 Interim Report:

In the first half of 2024, the company completed operating income of 0.79 billion yuan, a year-on-year increase of 2.90%, achieved net profit of 0.353 billion yuan, a year-on-year increase of 2.07%, and achieved net profit deducted from non-mother of 0.344 billion yuan, an increase of 2.77% year-on-year.

Among them, 2024Q2 completed operating income of 0.385 billion yuan, a year-on-year decrease of 3.93%. In 2024Q2, the company achieved net profit of 0.14 billion yuan, a year-on-year decrease of 5.46%, after deducting non-return net profit of 0.135 billion yuan, a year-on-year decrease of 3.90%.

Investment highlights:

Trade logistics revenue increased year on year, and the year-on-year decrease in exchange losses drove steady growth in the first half of 2024. The company completed operating income of 0.79 billion yuan, an increase of 2.90% year on year, mainly due to the increase in trade logistics revenue compared to the same period last year. However, due to the four-day increase in the number of free passenger bus days on holidays compared to the same period in 2023 and the impact of heavy rainfall in the Liangguang region, the company's toll collection revenue declined year-on-year. In the end, the company achieved toll revenue of 0.576 billion yuan, a decrease of 1.93% over the previous year. However, in the first half of 2024, due to a decrease in exchange losses due to the company's dollar loans compared to the same period last year, the company's financial expenses were 0.059 billion yuan, a year-on-year decrease of 29.65%. In the end, the company achieved net profit of 0.353 billion yuan to mother in 2024H1, an increase of 2.07% over the previous year, and completed deducted net profit of 0.344 billion yuan, an increase of 2.77% over the previous year.

Trade logistics continues to gain strength, and rapid renovation and expansion has helped the company to develop steadily until 2024H1. The investment promotion work for the Guangxi Jinqiao International Agricultural Products Wholesale Market Phase III project is progressing steadily. The company is actively introducing well-known enterprises in related business formats in the industry to promote the steady development of trade and logistics business. Furthermore, on June 27, 2024, the company announced that it intends to invest in the construction of the Nanning-Baise section renovation and expansion project (Tanluo to Baise section) of the G80 Guangkun Expressway. The total length of the project is about 177.05 kilometers, and the construction period is 4 years. The total investment is estimated to be about 20.43 billion yuan. The Tanluo to Baise Expressway is the company's core asset. The renovation and expansion is expected to effectively relieve traffic pressure on this section of the road, enhance the travel experience of car owners and users, and help the company achieve steady development.

Profit forecasts and investment ratings

We expect Wuzhou Transportation's 2024-2026 revenue to be 1.683 billion yuan, 1.743 billion yuan, and 1.808 billion yuan, respectively, +3%, +4% year-on-year; net profit to mother will be 0.68 billion yuan, 0.696 billion yuan and 0.71 billion yuan, respectively, +3%, +2% year-on-year, corresponding to EPS 0.42 yuan, 0.43 yuan, and 0.44 yuan; the corresponding PE is 8.83 times, 8.63 times, and 8.45 times. The renovation and expansion of the company's core road section helped the company's main business develop steadily. It was covered for the first time, giving it an “increase in weight” rating.

Risk warning

Road network competition risk; risk of changes in toll policies; risk that rapid renovation and expansion progress falls short of expectations; risk that the Jinqiao Market Phase III project falls short of expectations; exchange rate risk.