Investment Rating - The report rates the industry as "Positive" [1] Core Insights - The report reviews the reform process of Japan's highway industry, highlighting the privatization reform initiated in 2005, which separated ownership and operational rights, and the significant debt burden inherited by the administrative body [5][24] - It discusses the flexible toll setting introduced post-privatization, including the implementation of discount systems and the extension of toll collection periods to manage debt [5][57] - The financial health of Japanese highway companies is characterized by stable revenues but low profit margins, with a compound annual growth rate (CAGR) of less than 1% in revenue from 2006 to 2023 [5][72] - The report suggests that China's highway sector can learn from Japan's experiences, particularly in extending toll collection periods and enhancing revenue from service areas [6][82] Summary by Sections 1. Review of Japan's Highway Reform Process - The privatization reform in 2005 led to the establishment of six highway companies responsible for construction and management, while a separate body managed the debt [24] - The debt inherited was approximately 37 trillion yen, with a current balance of about 25 trillion yen as of the end of 2023 [5][57] 2. Comparison of Japanese Highway Companies' Operations - The report notes that Japan's highway companies manage 94% of the national highway network, with stable traffic volumes and toll revenues [5][65] - The revenue from tolls constitutes about 90% of total income, while service area operations contribute significantly to profits [5][76] 3. Investment Recommendations - The report highlights the scarcity of high-growth industries in a complex macroeconomic environment, emphasizing the value of high-dividend assets in the highway sector [7] - It recommends specific high-dividend stocks such as Anhui Expressway H, Ninghu Expressway H, and China Merchants Highway, particularly in light of potential regulatory changes extending toll collection periods [7][86]