Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 4.89 [7][8]. Core Views - The company plans to acquire a 55% stake in the high-quality Pinglin Expressway for a consideration of RMB 758 million, which is expected to enhance profitability by approximately 9% in 2025 [2][3]. - The sale of a 60% stake in the Tianjin Xionghu Expressway is also planned, which is anticipated to avoid high capital expenditures associated with its upcoming expansion [4]. - The report highlights that the recent interest rate cuts in the U.S. are favorable for the valuation recovery of high dividend yield assets in Hong Kong [5]. Summary by Sections Acquisition and Sale - The acquisition of Pinglin Expressway is located in a densely populated area with a mature road network, and it has recorded revenues of RMB 482 million and net profits of RMB 119 million in 2023 [3]. - The Tianjin Xionghu Expressway, which is being sold, contributed approximately 0.7% to the company's profits in 2023 [2][4]. Financial Projections - The company’s projected net profits for 2024, 2025, and 2026 are RMB 646.45 million, RMB 742.78 million, and RMB 720.96 million respectively [2][14]. - The expected earnings per share (EPS) for 2024 and 2025 are RMB 0.39 and RMB 0.44 respectively [14]. Valuation Metrics - The target price of HKD 4.89 is based on a 10x PE ratio for the estimated EPS of RMB 0.44 for 2025, reflecting an increase from the previous target price of HKD 4.22 [12][8]. - The estimated dividend yield for 2024 is projected to be 6.8%, which is higher than the average of 6.3% from 2014 to 2023 [5][8]. Market Context - The report notes that the U.S. Federal Reserve's interest rate cuts are likely to positively impact the valuation of high dividend yield stocks in Hong Kong [5].
越秀交通基建：拟收购优质路产，降息利好估值修复