Investment 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].

Core Viewpoint - The company reported a decline in revenue for the first half of 2025, but managed to achieve a slight increase in net profit, indicating resilience in profitability despite revenue challenges [1][2]. Financial Performance - In H1 2025, the company achieved operating revenue of 10.739 billion yuan, a year-on-year decrease of 11.52%, while net profit attributable to shareholders was 1.696 billion yuan, an increase of 3.89% [1]. - In Q2 2025, the company reported operating revenue of 6.268 billion yuan, down 17.58% year-on-year, with net profit attributable to shareholders at 889 million yuan, up 3.04% [1]. Revenue Breakdown - Toll revenue showed steady growth, with H1 2025 toll revenue increasing by 5.54% year-on-year to 4.914 billion yuan, supported by a total traffic volume of 101 million vehicles, up 13.90% [2]. - Segment performance included: - Road and bridge operations: Toll revenue of 4.914 billion yuan, up 5.54% [2]. - Capital operations: Rail transit group revenue of 2.665 billion yuan, up 16.27% [2]. - Information group revenue of 1.438 billion yuan, down 0.25% [2]. - Qilu Expressway revenue of 1.067 billion yuan, down 61.98% due to a decline in construction business revenue [2]. Infrastructure Development - Core infrastructure expansion projects are progressing well, with significant completion rates reported for various segments, which are expected to enhance traffic volume and toll rates post-completion [3]. - Specific project completion rates include: - Beijing-Taiwan Expressway: 95% for subgrade, 85% for pavement, and 97.2% for bridges [3]. - S16 Rongwei Expressway: 9.17% for subgrade [3]. - G220 Dongshen Line: 27% for main works [3]. Profit Forecast and Investment Outlook - The company forecasts net profits attributable to shareholders of 3.346 billion yuan, 3.630 billion yuan, and 3.871 billion yuan for 2025-2027, with corresponding PE ratios of 13.2x, 12.1x, and 11.4x [4]. - As a leading player in the national expressway sector, the company is expected to benefit from stable cash flows from quality road assets and the nearing completion of core infrastructure projects, which may catalyze profit growth [4].

Investment Rating - The investment rating for the company is "Outperform" [1] Core Views - The company reported a robust growth in toll revenue, achieving a total revenue of 3.741 billion RMB in H1 2025, which represents a year-on-year increase of 11.7% [6] - The net profit attributable to the parent company for H1 2025 was 960 million RMB, reflecting a year-on-year growth of 4.0% [6] - The company’s toll revenue for H1 2025 reached 2.45 billion RMB (after tax), marking a significant increase of 13.59% year-on-year, driven by improved traffic flow from newly opened sections of highways [6] - The ongoing expansion and upgrade of core road assets are expected to sustain future traffic growth, with the successful completion of the Xuanguang Expressway project enhancing capacity and economic benefits [6] - The company has a solid dividend policy, committing to distribute at least 60% of the net profit attributable to the parent company in cash dividends over the next three years [6] - The profit forecast for 2025E-2026E has been slightly adjusted upwards, with expected net profits of 1.955 billion RMB and 2.002 billion RMB respectively, corresponding to PE multiples of 13 and 12 [6] Financial Data and Profit Forecast - Total revenue projections for the company are as follows: 7,147 million RMB for 2025E, 7,228 million RMB for 2026E, and 7,267 million RMB for 2027E, with growth rates of 0.8%, 1.1%, and 0.5% respectively [2] - The net profit attributable to the parent company is forecasted to be 1,955 million RMB for 2025E, 2,002 million RMB for 2026E, and 2,119 million RMB for 2027E, with growth rates of 17.1%, 2.4%, and 5.8% respectively [2] - The earnings per share (EPS) are projected to be 1.14 RMB for 2025E, 1.17 RMB for 2026E, and 1.24 RMB for 2027E [2] - The gross margin is expected to improve from 38.6% in 2025E to 40.2% in 2027E [2] - The return on equity (ROE) is projected to be 12.4% for 2025E, declining to 10.7% by 2027E [2] Market Data - The closing price of the company's stock is 14.59 RMB, with a market capitalization of 17,006 million RMB [3] - The stock has a price-to-book ratio of 2.1 and a dividend yield of 4.14% [3] - The company's net asset per share is 6.99 RMB, with a debt-to-asset ratio of 55.66% [3]