ANHUI EXPRESSWAY(SH:600012)2024-09-19 08:40Investment Rating - The report initiates coverage with an "Accumulate" rating for the company [6][9]. Core Insights - The company benefits from steady growth in vehicle ownership and upcoming optimization of toll road management regulations, which are expected to enhance operational efficiency [6][19][24]. - The company's core assets are strategically located in the Yangtze River Delta, supported by state-owned shareholders, which enhances operational capabilities [6][26][28]. - The company's performance is driven by both traffic growth and external acquisitions, with significant improvements in revenue and profit from its toll road business [6][35][45]. - There is substantial potential for external acquisitions, with a high dividend payout ratio that rewards shareholders [6][50][52]. Summary by Sections 1. Vehicle Ownership Growth and Regulatory Optimization - Vehicle ownership in China has been steadily increasing, reaching 345 million by June 2024, with a year-on-year growth of 5.18% [19]. - Investment in road networks has seen steady growth, with highway construction investment reaching 1,595.5 billion in 2023, up from 1,150.4 billion in 2019 [22]. - The upcoming optimization of toll road management regulations is expected to extend the concession periods for operational highways, encouraging more investment [24][25]. 2. Core Assets and State-Owned Support - The company, established in 1996, is the only publicly listed toll road company in Anhui Province, controlling 10 toll road projects with approximately 609 kilometers of operational roads [26][28]. - The stable shareholding structure, with significant ownership by the Anhui State-owned Assets Supervision and Administration Commission, provides a solid foundation for the company's operations [28]. 3. Traffic Growth and Performance Improvement - The company has seen significant revenue contributions from its toll roads, with the He-Ning Expressway generating 1.404 billion in revenue in 2023, accounting for 34.3% of the toll road business [35]. - The company's revenue and profit have shown a recovery trend post-COVID-19, with 2023 revenue reaching 6.631 billion, a year-on-year increase of 27.4% [45]. - The company's gross profit from toll road operations improved from 1.628 billion in 2018 to 2.586 billion in 2023, driven by increased traffic and reduced impact from toll exemptions [45][46]. 4. Acquisition Potential and Shareholder Returns - The company has a rich pool of quality toll road assets in Anhui, with the provincial highway toll mileage reaching 5,804 kilometers in 2023, indicating a long-term growth trend [50][52]. - The company maintains a high dividend payout ratio of approximately 60.05%, supported by strong operating cash flow, which positions it well for future acquisitions and expansions [6][50].