Ge Long Hui·2025-08-30 03:47Core Viewpoint - Sichuan Expressway's 1H25 results show a decline in revenue but an increase in net profit, aligning with expectations, indicating resilience amid challenging conditions [1][2]. Financial Performance - Revenue decreased by 23.14% YoY to Rmb4,126 million in 1H25, with a net profit attributable to shareholders rising by 19.93% YoY to Rmb837 million [1]. - In 2Q25, revenue fell 32.17% YoY to Rmb2.28 billion, while net profit attributable to shareholders increased by 24.2% YoY to Rmb381 million [1]. - Toll revenue slightly decreased by 2.25% YoY to Rmb2.27 billion in 1H25, with mixed performance across core road assets [1][2]. Expense Management - Financial expenses decreased by 31.0% YoY, and general and administrative expenses fell by 14.8% YoY, contributing to profit through cost reduction and efficiency improvements [2]. Growth Potential - The expansion of Chengle Expressway is nearing completion, and Chengya Expressway has secured an expansion bid, expected to allow for higher toll rates and longer tolling periods [3]. - The acquisition of the Second Ring (Western) Expressway is projected to contribute Rmb160 million in profit in 2025, along with a cumulative compensation of Rmb31.48 million for 2023-2024 [4]. Shareholder Returns - The company emphasizes shareholder returns, with a dividend payout ratio not lower than 60% for 2023-2025, leading to a 2024 dividend yield of 6.4%, one of the highest in the highway sector [5]. - Estimated dividend yields for 2025 and 2026 are projected at 7.0% and 7.4%, respectively, indicating attractive returns [5]. Valuation - A-shares are trading at 10.9x 2025e and 10.4x 2026e P/E, while H-shares are at 8.6x 2025e and 8.1x 2026e P/E [6]. - Target prices are set at Rmb6.85 for A-shares (implying 13.3x 2025e P/E) and HK$5.61 for H-shares (implying 10.0x 2025e P/E), with respective upsides of 21.9% and 16.4% [6].