China Merchants Highway (001965): The performance is in line with expectations The tail-spinning effect of road property acquisitions leads to faster growth
The 1H results are in line with our expected 1H revenue36.
88 ppm, one year + 35%; gross profit exceeds + 27%, 杭州夜网 gross profit margin drops 3 ppt; net profit attributable to mother 23.
01 yuan, corresponding to a relative profit of 0.
37 yuan a year + 14%.
2Q revenue grew 41% per year and net profit increased 12% per year, in line with our expectations of 14% annual growth.
1H investment income increased 8% to 18 in ten years.
US $ 0.7 billion (mainly a joint venture highway company), contributing 66% of the profit margin, ranking slightly above 1 ppt in the past year, mainly due to higher profit growth brought by the acquisition of controlling highways.
Main stock companies: Ninghu Expressway and Shandong Expressway, due to the disposable income of the same period last year, contributed to the continuous increase in investment income during the period.
1H’s main business sub-segments: Investment and operation (including 西安耍耍网 highway and photovoltaic operations) revenue / gross accounted for 72% / 95% of total revenue / gross gross profit, and revenue / gross margin exceeded 26% / 24% growth.The tailspin effect of the acquisition of road products (increased the revenue of Chongqing, Guizhou for 4 months, Shanghai and Chongqing for 4 months, and Fufu for 6 months), the total traffic flow / income increased by 11% / 10%, and the endogenous increase was 5%/ 3%.
The revenue of the transportation technology sector (CASC) increased by 53% each year, and the gross profit increased by 82%, and the business was developing well. The smart transportation sector currently has a smaller volume, but it is growing faster, with revenue increasing by 245%, and gross profit increasing by 9 times.
Financial situation: Financial expenses increase by 80% per year (increments of 2.
US $ 1.2 billion, mainly due to new bond issuance and new interest-bearing debts from newly acquired companies since the second half of 2018.
The company’s final account has 9.6 billion in monetary funds.
Asset-liability ratio is 41%. It is estimated to increase 3PPT at the beginning of the period, but it is still healthy to divide with peers.
Development Trends We expect the net profit of 2H to exceed the growth rate to be slower than 1H, which is mainly based on the absence of the tailspin effect of acquisitions. The increase in tolls on the holding section will return to the endogenous growth of single digits.
We expect that the company will continue to actively acquire road property in recent years, and the revenue and profit of the main road industry will maintain a double-digit growth.
At the same time, we suggest to pay attention to the growth of transportation technology and intelligent transportation in the company’s highway industry chain.
Earnings forecasts and projections maintain 2019/20 net profit forecasts44.
1.2 billion (+ 13% y / y) / 50.
95 percent (+ 16%).
At present, it generally corresponds to 2019/20.
1x / 9.
6 times price-earnings ratio, 3.
6% / 4.
2% dividend yield.
We maintain our Outperform Industry Rating and Target Price of 10.
20 yuan, corresponding to April 2019/20.
3 times / 12.
4 times price-earnings ratio, 29% growth potential.
The risk industry policies are negative; economic growth is less than expected; capital costs increase.