20180820-中国银河国际证券-深圳高速公路股份-00548.HK-Strong_1H_2018_Results_as_Expected.Maintain_BUY._7页_1mb

报告摘要

Shenzhen Expressway - H [0548.HK] Summary

Core Content

Shenzhen Expressway (SZE) reported strong financial results for the first half of 2018 (1H18), with an EPS of RMB0.444, representing a 37.5% YoY increase. This growth was influenced by one-off items, such as a RMB180m compensation related to the Meilin Checkpoint Project. Excluding these items, the EPS growth was 10.1% YoY, indicating underlying performance.

The company is expected to achieve a full-year reported earnings growth of 28%, driven by high single-digit revenue growth from existing toll road projects and increased contributions from new projects like the Coastal, Yichang, and Derun Environment projects. The revised 2018E revenue forecast is RMB6,067m, up 5% from the previous estimate, primarily due to the consolidation of the Coastal Expressway.

The target price (TP) has been revised to HK$9.10, suggesting a 30.8% upside from the current share price of HK$6.96. SZE is viewed as a defensive play due to its stable toll road business and a dividend yield of 5.6%, which offers downside protection.

Main Points

Strong 1H18 Performance:
- EPS increased by 37.5% YoY to RMB0.444.
- Revenue rose 16.9% YoY to RMB2,678m due to the consolidation of the Coastal Expressway and strong organic growth in traffic volume and tariffs.
- The Meilin Checkpoint Project contributed a RMB180m compensation to the results.
New Project Contributions:
- The Yichang Expressway, acquired in June 2017, contributed approximately RMB205m in revenue.
- The Coastal Expressway was consolidated into SZE’s financial statements in February 2018, enhancing revenue and EPS growth.
Valuation and Earnings Forecast:
- The fair value estimate using SOTP is RMB8.04/share or HK$9.10/share.
- The dividend yield is expected to rise to 6.0% by 2019 and 6.2% by 2020, reinforcing the defensive appeal of the stock.
Risks:
- Weaker traffic volume due to macroeconomic uncertainty.
- Lower value from the Meilin Checkpoint Project due to the tightening Shenzhen property market.
- RMB depreciation leading to increased FX losses and higher interest costs, which may impact margins.

Key Financials

Metric	FY2016	FY2017	FY2018E	FY2019E	FY2020E
Revenue (RMB m)	4,532	4,837	6,067	6,178	6,498
YoY Revenue Growth	32.5%	6.7%	25.4%	1.8%	5.2%
Net Profit After Tax (RMB m)	1,169	1,426	1,827	1,944	2,034
YoY Net Profit Growth	-24.7%	22.0%	28.1%	6.4%	4.7%
EPS (RMB)	0.54	0.65	0.84	0.89	0.93
YoY EPS Growth	-24.5%	22.0%	27.9%	6.4%	4.7%
ROE (%)	9.5	11.3	13.4	13.1	12.8
P/E (x)	12.5	10.3	8.0	7.5	7.2
Dividend Yield (%)	3.3	4.5	5.6	6.0	6.2

Investment Highlights

Solid 1H2018 EPS Growth: Despite one-off items, the company's earnings were strong, with a 37.5% increase in EPS.
Meilin Checkpoint Project: A potential catalyst, with a RMB180m compensation received in April 2018. However, the tightening property market limits the room for positive surprises.
Defensive Investment: SZE is considered a defensive play with a dividend yield of 5.6%, offering downside protection in a volatile market.
Valuation Adjustments: The TP was revised to HK$9.10, reflecting higher finance costs and FX losses.

Peer Comparison

Company	Price (HK)	Mkt Cap (US$m)	P/E (2018E)	P/E (2019E)	P/E (2020E)	ROE (2018E)	ROE (2019E)	ROE (2020E)	Div Yield (2018E)	Div Yield (2019E)	Div Yield (2020E)
Shenzhen Expressway Co-H	6.96	2,282	8.05	7.32	6.88	13.41	13.14	12.8	5.6	6.0	6.2
Jiangsu Express Co Ltd-H	9.47	6,201	11.65	10.37	10.00	16.21	15.74	15.06	5.56	5.76	5.86
Zhejiang Expressway Co-H	6.27	3,469	7.38	7.32	6.95	15.06	14.76	14.29	6.88	7.28	7.28
Hopewell Highway Infrastructure	4.64	1,821	17.54	20.84	19.35	11.44	11.82	11.44	4.31	4.68	4.68
Sichuan Expressway Co-H	2.42	1,355	5.52	7.57	6.63	5.77	6.25	5.77	2.92	3.57	3.96
Yuexiu Transport Infrastructure	5.98	1,275	8.51	8.06	7.18	10.18	10.31	10.99	6.35	6.49	6.68

Analysts

Tony Li, CFA: Analyst
Wong Chi Man, CFA: Head of Research

Disclaimer and Interests

This report is not directed at, or intended for distribution to, any person or entity in a jurisdiction where it would be contrary to law.
No representation or warranty is made regarding the accuracy of the information.
China Galaxy International may have financial interests in the subject company, potentially equal to or more than 1% of the market cap.
Some individuals may hold positions in the company or be involved in investment banking services.

Analyst Certification

The analyst certifies that the views expressed accurately reflect his or her personal views.
No part of the analyst’s compensation was directly or indirectly related to the specific views in the report.
The analyst and associates did not trade in the securities covered in the report within 30 days before its issue and will not trade within three business days after.

Investment Rating

BUY: Indicates that the share price is expected to increase by >20% within 12 months.
HOLD: No clear catalyst, and the rating may be downgraded if there is no improvement.
SELL: Indicates that the share price is expected to decrease by >20% within 12 months.