SDHS(600350) 华泰证券·2024-09-03 08:03Investment Rating - The investment rating for the company is "Buy" with a target price of RMB 9.41 [5][6]. Core Views - The company's interim report showed a slight decline in net profit, primarily due to insufficient demand for freight vehicles. In the first half of 2024, the company achieved revenue of RMB 12.1 billion (up 6.2% year-on-year) and a net profit attributable to shareholders of RMB 1.63 billion (down 7.2% year-on-year), which was slightly below the expected RMB 1.69 billion [2][3]. - The decline in profitability is attributed to factors such as insufficient freight demand, network diversion, and an increase in free toll days. The profit forecasts for 2024, 2025, and 2026 have been adjusted to RMB 3.19 billion, RMB 3.46 billion, and RMB 3.75 billion respectively [2][3]. Summary by Sections Financial Performance - In the first half of 2024, toll revenue (including tax) decreased by 10% to RMB 4.66 billion, with gross profit declining by 15% to RMB 2.43 billion, accounting for 70% of total gross profit. The traffic volume saw a year-on-year decline of 1%, which was less than the drop in toll revenue [3]. - The company’s freight revenue is significantly affected by macroeconomic cycles, and the increase in free toll days and adverse weather conditions have also impacted traffic flow [3]. Business Segments - The rail transit group, in which the company holds a 51% stake, reported a revenue of RMB 2.29 billion (down 2% year-on-year) and a net profit of RMB 195 million (up 7% year-on-year). The information group, with a 65% stake, contributed a net profit of RMB 95 million due to its acquisition at the end of 2023 [4]. - The company’s investment income increased by 9.6% year-on-year to RMB 700 million, driven by the disposal of some equity investments and increased interest income [4]. Future Outlook - The impact of traffic volume reduction on the Jiqing Expressway is expected to stabilize, with toll revenue declines projected to narrow to near zero by the fourth quarter. The Jihe Expressway expansion project is anticipated to be completed by the end of 2024, significantly increasing traffic capacity [7]. - The company’s financial expenses decreased by 13.5% year-on-year to RMB 810 million due to declining market interest rates [7].