20240306-招银国际-越秀交通基建-01052.HK-2023_core_profit_+91__YoY_but_below_estimates___7__yield_+_potential_asset_injection_10页_909kb

Yuexiu Transport (1052HK) Report Summary

Financial Performance

• 2023 Revenue grew 21% YoY to RMB 397 billion, driven by toll recovery and acquisition of Henan Lanwei Expressway.
• Core net profit surged 91% YoY to RMB 865 million after impairment adjustments; below consensus due to lower gross margin (54.1%).
• Dividend yield >7%, full-year payout ratio ~60%; final dividend HK$0.15/share.
• Earnings forecast revised down for 2024E and 2025E by 7% and 3% respectively, citing lower traffic volumes and gross margins.

Analyst Recommendation & Valuation

• Maintain BUY recommendation with target price of HK$72 (vs. prior HK$75).
• DCF-based TP cut to HK$7.2; valuation implies 11x 2024E P/E, above historical 10.2x P/E average.
• Potential upside from asset injection, which could enhance profitability; target TP justified by foreseeable growth.

Growth Drivers

• Increased stake in China Merchants Expressway (7% ownership) suggests support for share price and potential asset injection into Henan Pinglin Expressway and other projects.
• Ongoing GNSR expressway expansion starting in June 2024, with minimal traffic impact during construction.
• Parent company planning asset injection of toll projects like Shandong Qinbin and Henan Pinglin Expressways to scale operations.

Key Risks

• Traffic diversion from parallel roads, potential increase in gearing and finance expenses.
• Uncertainties regarding GNSR project execution and parent company's asset integration strategy.

Summary Insights
The report maintains a BUY stance despite earnings downgrades, highlighting potential from asset injections and strong dividend yield, while cautioning against risks from traffic issues and financial leverage.