Core Viewpoint - Yuexiu Transport Infrastructure reported strong 1H25 results, with revenue and net profit both increasing by 14.9% YoY, driven by higher toll revenue and reduced financial expenses [1][2]. Financial Performance - Revenue for 1H25 reached Rmb2.10 billion, a 14.9% increase YoY [1]. - Attributable net profit also rose 14.9% YoY to Rmb361 million, exceeding expectations due to robust toll revenue growth and a significant decline in financial expenses [1]. - The firm’s toll revenue grew 15.2% YoY to Rmb2.06 billion, attributed to the consolidation of Pinglin Expressway and changes in the road network [2]. - Operating costs increased by 22.8% YoY, with amortization of intangible operating rights up 26.3% YoY, leading to a gross margin decline of 3.4 percentage points to 46.8% [3]. Dividend Policy - An interim dividend of HK$0.12 per share was declared, consistent with 1H24, resulting in a dividend payout ratio of 50.6% [2]. - The firm maintains a stable dividend policy, with a projected payout ratio of 58.5% in 2024, potentially yielding 6.9% and 7.3% in 2025 and 2026, respectively [4]. Growth Potential - The acquisition of Pinglin Expressway is expected to enhance the firm's road network in central China, contributing to long-term growth [4]. - Future expansions, such as the Guangzhou North Second Ring Road and potential asset injections from the parent company, are anticipated to further drive growth [4]. Financial Forecasts and Valuation - Net profit forecasts for 2025 and 2026 have been raised by 3.4% and 4.3%, respectively, to Rmb739 million and Rmb770 million, due to ongoing reductions in financial expenses [5]. - The stock is currently trading at 8.5x and 8.0x estimated P/E ratios for 2025 and 2026, respectively, with a target price increase of 4.3% to HK$4.34, indicating a 6.1% upside [5].