2025-09-28 14:57Summary of China Expressway Equities Conference Call Industry Overview - The conference call focused on the China Expressway sector, discussing potential investment opportunities and challenges in the upcoming quarters, particularly in 4Q25 [1] Key Points and Arguments Market Performance - Since July 2025, sector share prices have fluctuated between -16% to +1%, while the Hang Seng Index (HSI) increased by +9% [2] - The sell-off was attributed to: 1. Soft toll growth 2. Investors' risk-on sentiment 3. Company-specific risks, including major shareholder sell-offs and earnings revisions [2][4] Investment Opportunities - There is a potential opportunity in 4Q25 as dividend yields are expected to return to an attractive range of 6-7% [2] - The expressway sector saw a share price rally of 5-15% in 4Q24 [2] Catalysts for Growth - Expected catalysts include: 1. Stable dividend policies leading to attractive yields [3] 2. Potential revisions to the Toll Road Ordinance 3. Asset injections, particularly from Jiangsu Expressway's Suxichang South Expressway, which has shown strong traffic growth [3] Toll Growth Projections - Despite soft toll growth in 2H25, projections for toll growth are as follows: - Zhejiang Expressway: -2% - Jiangsu Expressway: +1% - Anhui Expressway: +10% [4][11] Company Ratings and Preferences - The preferred companies in the sector are: - Anhui Expressway: Rated as Buy for better-than-peer toll income growth and high dividend yield - Zhejiang Expressway: Rated as Buy due to potential upside from its securities business and upcoming A-share listing - Jiangsu Expressway: Rated as Hold due to concerns over road expansion projects and uncertain returns from greenfield projects [5][8] Financial Metrics and Valuations - Current and target prices for key companies are as follows: - Anhui Expressway - H: Current price HKD 11.35, Target price HKD 15.70 (Buy, +38.3% upside) - Anhui Expressway - A: Current price RMB 12.92, Target price RMB 19.70 (Buy, +52.5% upside) - Zhejiang Expressway: Current price HKD 7.26, Target price HKD 7.70 (Buy, +6.1% upside) - Jiangsu Expressway - H: Current price HKD 9.27, Target price HKD 10.50 (Hold, +13.3% upside) [6][11] Dividend Policies - Companies are expected to maintain stable dividend payouts: - Anhui Expressway: Minimum 60% payout ratio for 2025-27 - Zhejiang Expressway: Expected stable dividends of RMB 0.49 for 2025-27 - Jiangsu Expressway: Expected stable absolute dividends [11][30] Risks and Challenges - Key risks include: - Slower-than-expected traffic volume growth - Uncertainties related to government policies affecting toll income and logistics costs - Potential negative impacts from road expansion projects [30][21] Conclusion - The China Expressway sector presents both opportunities and risks, with a focus on stable dividends and potential growth catalysts in the near future. Investors are advised to consider the specific company ratings and market conditions when making investment decisions [21][30]