GF SECURITIES·2025-03-14 08:42Investment Rating - The report assigns an "Accumulate-A/Accumulate-H" rating to the company [4]. Core Views - The company benefits from its unique position as the only publicly listed highway operator in Anhui Province, leveraging local resources and cost advantages to maintain industry-leading profit margins and returns [10][18]. - The provincial road network expansion and inter-provincial connectivity are key growth drivers, with a projected CAGR of around 5% from 2023 to 2035 [10]. - The company is expected to see improved fundamentals in the short to medium term due to macroeconomic support and the ramp-up of new highway capacities [10]. - Long-term prospects are bolstered by the ongoing development of the provincial transportation network, which is anticipated to enhance traffic flow and revenue generation [10]. Financial Forecast - Revenue is projected to grow from 5,206 million RMB in 2022 to 6,631 million RMB in 2023, before declining to 4,208 million RMB in 2025 [2]. - Net profit is expected to fluctuate, with estimates of 1,445 million RMB in 2022, increasing to 1,660 million RMB in 2023, and then decreasing to 1,519 million RMB in 2024 [2]. - The company's EPS is forecasted to be 0.87 RMB in 2022, rising to 1.00 RMB in 2023, and then slightly declining to 0.92 RMB in 2024 [2]. Company Overview - The company was established in 1996 and is the first highway company listed in Hong Kong, focusing on the operation of toll roads in Anhui Province [18]. - It operates 10 toll roads, with a total operational mileage of 609 kilometers, primarily located in key traffic areas of Anhui [23]. - The average remaining toll collection period for its projects is approximately 10.8 years, which is in line with industry standards [29]. Cost and Profitability - The company enjoys a cost advantage due to lower construction costs in Anhui, attributed to favorable terrain and lower land acquisition costs [51]. - The average operating cost per kilometer is significantly lower than industry peers, contributing to its strong profitability metrics [52]. - The company has maintained a high gross margin, with a reported gross margin of 63% in 2023, and a net profit margin of 41% [33]. Dividend Policy - The company has increased its dividend payout ratio to 60% since 2021, reflecting its commitment to shareholder returns [52]. - This high dividend yield, combined with robust profit recovery, has led to a significant increase in the company's stock price, outperforming peers since 2020 [52].