类别:公司 机构:中国国际金融股份有限公司 研究员:Wenjie ZHANG/Qibin FENG/Xin YANG 日期:2023-09-01

  1H23 results beat our expectations

      Guangdong Provincial Expressway Development (GPED) announced 1H23 results: Revenue grew 13.8% YoY (after retrospective adjustment) to Rmb2.34bn, and attributable net profit rose 14.6% YoY (after retrospective adjustment) to Rmb886mn. GPED made Rmb45.63mn of provisions for impairment of management and maintenance expenses it incurred for Guangfo Expressway.

      The firm’s 1H23 results beat our expectations mainly thanks to reduced depreciation and amortization expenses of Fokai Expressway resulting from changes to accounting standards made in June 2021 amid recovering vehicle traffic. In 1H23, GPED’s gross margin rose 2.2ppt YoY to 68.4%, and net margin edged up 0.2ppt YoY to 37.8%.

      In 2Q23, revenue rose 19.6% YoY (or 2.7% QoQ) to Rmb1.19bn, attributable net profit grew 38.8% YoY (or 16.1% QoQ) to Rmb476mn, and net margin increased 5.5ppt YoY to 40.1%.

      Trends to watch

      Vehicle traffic recovering; suspension of toll collection for Guangfo Expressway weighed on toll revenue. In 1H23, GPED’s toll revenue rose 14.41% YoY to Rmb2.31bn mainly due to a low base caused by COVID-19 in 2022, but declined 5.3% from 1H21 levels mainly because Guangfo Expressway suspended its collection of toll fees in 2022.

      Excluding the impact of suspending toll collection for Guangfo Expressway, the firm’s total toll revenue from expressways in which it holds full or partial stakes rose 18.2% YoY, up 3.8% from 1H21. Vehicle traffic of Fokai increased 6.6%, Jingzhu Expressway’s section between Guangzhou and Zhuhai edged up 0.2%, and Guanghui expressways gained 12.3% from 1H21 levels, with respective toll revenue growing 6.9%, 2.1%, and 2.6%. We attribute the relatively slow traffic growth of Jingzhu Expressway’s section to the negative impact of reconstruction and expansion projects.

      GPED’s profitability improved on decreased depreciation and amortization costs of Fokai Expressway. Although suspension of toll collection for Guangfo Expressway weighed on toll revenue, gross margin of GPED’s toll road business rose 2.2ppt YoY to 68.6% in 1H23, up by 3.8ppt from 1H21. We mainly attribute improved profitability to reduced depreciation and amortization costs generated by Fokai Expressway due to changes in accounting standards made in June 2021. Gross margin of Fokai Expressway was 67.1% in 1H23, up 20.2ppt from 1H21.

      We estimate gross profit of Fokai Expressway increased Rmb0.17bn compared with 1H21 (or Rmb0.15bn excluding the impact of revenue growth)。

      High dividend payout ratio; attractive dividend yield. In 2021, the company issued the Announcement of Shareholder Return Plan for 2021- 2023, stating that its dividend payout ratio for the next three years will be at least 70%, one of the highest among listed toll road stocks. We estimate the current price implies a dividend yield of 7.4% in 2023 and 7.8% in 2024. We think GPED is a highly defensive name in the expressway sector.

      Financials and valuation

      We keep our 2023 and 2024 earnings forecasts unchanged. The stock is trading at 9.5x 2023e and 8.9x 2024e P/E. We maintain an OUTPERFORM rating and our TP of Rmb8.82 (implying 11.0x 2023e and 10.4x 2024e P/E), with 16.2% upside.


      Slower-than-expected economic growth and/or progress of reconstruction and expansion projects.