China Merchants Expressway Network Technology Holdings Co.Ltd(001965) (001965)
Key investment points
Both endogenous and extension are excellent, and the main business performance has excess growth
China Merchants Expressway Network Technology Holdings Co.Ltd(001965) relying on the industry resource coordination ability of the major shareholder China Merchants Group, it has arranged high-quality young road products nationwide in the main highway industry, and participated in a number of A-share listed high-speed companies, creating and continuously promoting performance growth with the "endogenous + extension" method. The compound growth of parent net profit in 16-19 years was 13.3%, which was significantly higher than the average growth rate of the industry.
1) From the perspective of stock, the company's existing road products are relatively new to the industry, the remaining charging period is higher than the industry average, and the excess growth rate of existing road products relative to the industry average is expected to exceed expectations;
2) From the perspective of increment, the company adheres to the strategy of extension M & A and expansion of high-quality road products. The cash acquisition of road products will bring EPS higher than expected growth. At the same time, the extension of highway industry chain is expected to realize downward and outward business output.
The high growth leader should enjoy the valuation premium, but the current low value has yet to return
At present, the PE (TTM) of section II of SW expressway is 9.52 times, but China Merchants Expressway Network Technology Holdings Co.Ltd(001965) the current forecast PE in 2021 is only 8.74 times, and the valuation is obviously low. The remaining charging period of the company's existing road products is longer than that of the industry, which has higher absolute value from the perspective of cash flow discount. At the same time, it is superimposed with the extension acquisition of high-quality road products, which has excess profit growth. Therefore, we believe that the company should have enjoyed the valuation premium relative to the industry.
Pay attention to the possible double catalysis in the future, and layout with absolute return or excess return
Potential catalyst 1: there is still room to improve the dividend ratio. Since the listing, the dividend proportion of the company has been around 40% from 2017 to 2019, and the dividend proportion of the company has been raised to nearly 50% in 2020, but there is still room for the dividend proportion of the head company. Assuming that we calculate according to the dividend ratio of 55%, according to our profit forecast, the dividend yield from 2021 to 2023 can reach 6.3%, 7.0% and 7.7% respectively, and the dividend income is considerable. The high dividend target of Expressway sector has good absolute income allocation value in the case of relatively cautious expectation of the market and macro-economy.
Potential catalyst 2: the policy side pays attention to the revision and promotion of laws related to highways. In November 2021, the Ministry of transport issued the legislative plan for the 14th five year plan of transportation, The highway law (Revised) is required to adjust and redefine the basic systems of toll road financing, construction, maintenance, operation and management, so as to realize the healthy and sustainable development of toll roads; the regulations on toll road management (Revised) is required Clarify the principles for determining the repayment period and operation period of toll roads to prevent the risk of government debt. We expect that after the policy revision is implemented, it is expected to relax the restrictions on road property operation period and management subject after expiration, improve the sustainability of cash flow and bring value revaluation from the perspective of DCF.
Profit forecast and valuation
Considering only the operation of the company's existing road products without considering the new road products in the future, we expect the company's net profit attributable to the parent company from 2021 to 2023 to be RMB 5.302 billion, 5.907 billion and 6.472 billion respectively, corresponding to the PE of the current stock price of 8.74 times, 7.84 times and 7.16 times respectively. The valuation is obviously low, has the absolute income allocation value at the bottom, and maintains the "buy" rating.
Risk warning: policy promotion is not as expected; The extension expansion was less than expected.
