Guangdong Expressway A (000429): 4Q cost is higher than expected, waiting for main business to reverse
Revenues and profits in 2019 have dropped significantly4.99%, 24.95%, lower-than-expected results On January 22, Guangdong Expressway announced its 2019 results forecast: 1) Revenue decreased by 4.99% to 30.5.8 billion yuan, net profit attributable to mothers decreased by 24.95% to 12.5.9 billion, net non-profit reduced by 10.37% to 12.5.1 billion; 2) Performance is lower than our expectations7.66%.The non-performance growth rate is mainly due to: 1) the impact of road network diversion; 2) the increase in ETC discounts; 3) the depreciation expenses of the southern section of Fokai increased.We expect EPS to be zero in 2020/2021.67/0.77 yuan with a target price of 9.34-9.56 yuan.The high index remains unchanged, maintaining the “overweight” rating. Affected by road network diversion and ETC discounts, 4Q19 revenue decreased slightly by 4Q19, and the company’s revenue decreased by 6.6%, mainly due to road network diversion, ETC discount intensity upgrade dragged down.Among them, 1) The main line of the Foshan First Ring Road is open to traffic, temporarily free of charge and no longer restricted for trucks, diverting the traffic volume of Guangzhou-Foshan and Fokai highways; 2) The opening of Nansha Bridge and the Humen Bridge’s cargo restrictions have some impact on the Guangzhou-Zhuhai East Highway.The expansion of the “Four to Eight Lanes” expansion in the southern section of Fokai has been completed in early November, and the toll rate has increased by 33%, but its positive impact is not enough to offset the impact of road network diversion.Since July, the Guangdong ETC toll discount has been adjusted from 98% to 5%, which is a drag on other roads outside the Fokai Expressway. The cost-side increase was higher than expected, or affected by project settlement in 4Q19. The company’s operating profit decreased by 34%, which was much higher than the revenue decline. The cost-side increase was higher than expected.Among them, 1) Reconstruction and expansion of the southern section of Fokai was completed in early November, transferred to fixed assets, and depreciation of road production increased; 2) Project settlement may be the reason for the increase in costs in 4Q19, and the special project of the provincial border toll station was cancelled for completion in December.In the fourth quarter of 19th, the net profit return to mothers decreased by 67%, and after the incomparable base effect of deferred deferred insulin was provided in the fourth quarter of 18th year, the non-net profit of 19 years in 4 years decreased by 28%. Looking forward to 2020, the impact of road network diversion will gradually be eliminated, and the performance is expected to reverse. We predict that the adverse factors affecting Guangfo and Fokai Expressway will be eliminated in 2020.Among them, 1) Foshan Yihuan Expressway has changed from free to toll since January, and we expect it to have a positive contribution to the passenger traffic of Guangfo and Fokai Expressways; 2) The reconstruction and expansion of the southern section of Fokai has been in early November 2019Upon completion, we expect the traffic volume to recover accordingly, and it is expected to boost the traffic volume of the connected Guangfo Expressway. The 33% increase in the toll standard of the Fokai South Section has a positive impact on revenue.In addition, the southern section of Fokai is also expected 南京夜网 to increase the fee life, DCF value is expected to increase, and depreciation is expected to decrease.The opening of the Nansha Bridge and the Humen Bridge’s cargo restrictions on the Guangzhou-Zhudong Expressway have become normal, and we expect traffic volume to improve several times a quarter. Maintain “Overweight” rating, high-yield still needs to consider road network changes and higher-than-expected costs in 4Q19. We adjust 2019/20/21 return to net profit return to motherhood to 12.59/14.08/16.0.4 billion (previously 13.63/15.31/17.2.7 billion).We expect the company’s dividend for 2019/20/21 to supplement 5.1% / 5.7% / 6.5% (assuming a dividend payout ratio of 70%). We adjust our target price to 9.34-9.56 yuan (previous time 8.70-9.10 yuan), based on: 1) Comparable company hub is 10.5x 2020PE, still giving 35% premium for high dividends, based on 14.2x 2020PE (previous 13).4x 2019PE) and 2020E EPS0.673 yuan, with an estimated target price of 9.56 yuan; 2) Based on WACC = 7.67% (previous 7).69%) Estimated target price 9.34 yuan.Maintain “Overweight” rating. Risk reminder: The economic scale of the Pearl River Delta, the road network diversion is higher than expected, and the epidemic affects residents’ travel.