SDHS(SH:600350) Shenwan Hongyuan Securities·2025-10-17 06:37Investment Rating - The report initiates coverage with an "Accumulate" rating for Shandong Expressway [1]. Core Views - Shandong Expressway is recognized as an excellent toll road operator in Shandong Province, benefiting from the completion of core road asset renovations and expansions, which drive steady revenue growth [7][8]. - The company focuses on shareholder value return through consistent high dividends and dynamic share buybacks, with a stable shareholding structure supported by state-owned assets [20][24]. - The report forecasts steady growth in net profit and earnings per share from 2025 to 2027, with expected net profits of 33.83 billion, 36.38 billion, and 37.06 billion yuan respectively, reflecting year-on-year growth rates of 5.8%, 7.5%, and 1.9% [6][8]. Summary by Sections Company Overview - Shandong Expressway operates approximately 2,913 kilometers of toll roads, with 1,604 kilometers owned and 1,309 kilometers managed under the Shandong Expressway Group [18][49]. - The company has a strong state-owned background, with the controlling shareholder holding 70.29% of the shares, ensuring stable governance [20]. Revenue and Profitability - The company’s total revenue for 2024 is projected at 28.49 billion yuan, with a year-on-year growth rate of 7.3% [6]. - The main revenue sources include toll fees, project construction, and engineering services, with toll fees accounting for 33.88% of total revenue in 2024 [28]. Financial Projections - The report anticipates that the company will achieve revenues of 285.03 billion, 287.97 billion, and 289.24 billion yuan from 2025 to 2027, with corresponding growth rates of 0%, 1%, and 0.4% [9]. - The expected earnings per share for the same period are 0.70, 0.75, and 0.77 yuan [6][8]. Market Position and Growth Drivers - The company benefits from the expansion of the highway network in Shandong Province, with plans to increase the total highway mileage to 15,000 kilometers by 2035 [53]. - The growth in vehicle ownership in Shandong, which reached 26.9 million in 2023, supports the increase in traffic volume on the highways [56]. Investment and Diversification - Shandong Expressway is diversifying its operations into areas such as electromechanical engineering, product sales, and railway transportation, leveraging its experience in highway investment and operation [7][8]. - The company’s investment income, particularly from long-term equity investments, is a significant contributor to its profitability, with investment income projected at 14.03 billion yuan for 2024 [77].