Key investment points
Railway freight and highway leaders have their own drivers, and the overall performance is stable
Railway Freight benefited from the continuous promotion of "public to railway" in bulk. Since 2017, China has started to promote the "transit railway" of bulk goods. The railway freight volume has increased by 43.3% from 2016 to 2021, and the railway freight turnover has increased by 39.5% from 2016 to 2021. According to the 14th five year plan for the development of comprehensive transportation services issued by the Ministry of transport, China's railway freight turnover will reach 17% (15.2% in 2021) by 2025. The promotion of structural reform of freight transportation will bring steady growth of railway freight.
The traffic flow of expressway is mainly passenger cars, which is also robust. For overseas economies, on the one hand, highways do not involve cross-border vehicle circulation and have no direct correlation; On the other hand, the proportion of highway collection and distribution port freight volume in highway freight volume is relatively low, and the correlation at the logistics level is low. For China's economy, from 2000 to 2019, the profit growth of the expressway sector was smooth, and the performance of the expressway sector was more stable during the economic downturn. According to the data of spring transportation in 2022, the average traffic flow of expressway network in the first 25 days increased by 7.5% compared with the same period in 2021, and increased by 8.0% compared with the daily average of 2019 before the epidemic. The overall traffic flow is in a steady recovery.
High cash flow enables high dividends, and there is a high probability that the market will run out of excess returns in the past liquidity margin period
The steady cash flow of railway and highway industry strongly supports the high dividend. The "loan investment construction operation" mode of railway freight and expressway determines that the relevant target companies have stable operating cash flow. In recent years, the profit cash ratio of Daqin Railway Co.Ltd(601006) has remained between 0.9-1.3, and the profit cash ratio of Expressway sector has remained between 1.4-1.9. Based on stable cash flow, the target company can actively repay shareholders with high dividends.
Dividends may have tax advantages. In addition, the subject of high dividends may have excess returns in the past liquidity easing period. From the perspective of Taxation, there are differences between stock dividend and bond interest income in terms of value-added tax and personal income tax. The after tax income of stock dividend is higher than that of bond interest income. From the perspective of relative return of stock price, we selected five high-score honglongtou target stocks in the high-speed sector and the railway freight leader Daqin Railway Co.Ltd(601006) to build a portfolio of other weighted stocks. Taking January 2011 as the time starting point, we found that in the past liquidity easing period, we often ran out of the positive cumulative excess income.
"Low value + high dividend" is the fundamental logic of highway and railway risk prevention
On the one hand, the valuation of high dividend targets at the head of highway and railway is generally at a relatively low level in history, China Merchants Expressway Network Technology Holdings Co.Ltd(001965) , Shandong Hi-Speed Company Limited(600350) , Jiangsu Expressway Company Limited(600377) , Guangdong Provincial Expressway Development Co.Ltd(000429) , Shenzhen Expressway Company Limited(600548) , Anhui Expressway Company Limited(600012) , Daqin Railway Co.Ltd(601006) Pb is at the historical 55%, 26%, 14%, 61%, 26%, 32% and 10% percentile respectively; On the other hand, the 2020 average dividend proportion of the high dividend target of railway and highway constructed by us is 65%, 25 percentage points higher than the arithmetic mean of the dividend proportion of a shares. It is suggested to pay attention to the absolute return value of the subject matter of high dividend of head high-speed and railway freight.
Risk warning: macro economy fluctuates greatly; The growth of expressway traffic flow is less than expected; The progress of the public to rail policy was less than expected.
