汇丰银行-中国-交通基础设施行业-中国高速公路：2020年收费收入前景的新关税不确定性-2019.11.8-46页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO MAINLAND CHINA Mixed traffic numbers for listed expressway companies:National expressways overall traffic volumes in September rose 8.8%y-o-y,with passenger vehicles(PV)and truck traffic up 9.8%yoy and 6.0%yoy,respectively.In 3Q19,national expressways PV and truck volumes increased 9.1%yoy and 7.6%yoy previously,higher than Chinas GDP growth at 6%yoy.However,toll revenue growth from listed expressway companies in September was mixed,partly related to the ETC(E-Tolling)discount policy impact,introduced from July 2019.We believe the governments 90%ETC penetration target is achievable and the negative impact on companies toll revenue may continue until 1H20.As of Oct 2019,ETC penetration had reached 80%or 150m users,while ETC facility instalment along the roads has also been fully completed.Solid result in 3Q19 helped by non-toll business:Most of the listed companies announced solid results in 3Q19,helped by their non-toll business.The core business toll revenue has been under pressure from July 2019 due to an increase in users of the ETC discount.We believe the policies set out in the“Expressway Management Ordinance”are favourable to the industry but may be delayed to 2020 until the national ETC target is completed.Most provinces will kick off hearings for new tariffs for trucks in Nov/Dec and final pricing should be announced before Jan 2020.However,we think the risk for toll revenue outlook in 2020 should be on the downside due to:1)government guidance to lower logistics costs;2)changing the toll settlement from regional to national may delay the process;and 3)the difficulty in monitoring the overloading issue.We think it is critical to check the 1Q20 company monthly statistics to see the magnitude of change to toll revenues under the new ETC system.Investment views:We like Shenzhen Expressway-H and Zhejiang Expressway(both rated Buy)due to their strong earnings growth upside from other business contribution and stable dividend outlooks.We adjust target prices and earnings estimates across the board following 3Q19 results.Sep 2019 national expressway traffic volumes stayed solid but company toll revenue mixed due to ETC discount policy New tariff for trucks introduced from 2020 could be a major risk to near-term toll revenues Our preferred Buys are Shenzhen Expressway-H(548 HK)and Zhejiang Expressway(576 HK)8 November 2019 Lesley Liu*Analyst,Infrastructure&Industrials Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2822 4524 Anderson Chow*Global Co-Head of Industrials Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6669 Sunny SUN*Associate Guangzhou *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations China Expressway Equities Transportation Infrastructure China Expressway coverage:Changes to TPs and key data Company Ticker Currency Current price _ TP _ _ Rating _ Upside/downside Market cap(USDm)6m ADTV(USDm)PE FY19e (x)PB FY19e (x)Dividend Yield(%)Old New Old New Shenzhen Expressway-H 548 HK HKD 10.92 11.30 12.10 Buy Buy 10.8%3,320 4.20 7.8 1.2 6.1 Shenzhen Expressway-A 600548 CH CNY 11.01 10.40 11.20 Hold Hold 1.7%3,320 6.45 8.8 1.4 5.4 Zhejiang Expressway 576 HK HKD 7.02 10.00 9.50 Buy Buy 35.3%3,964 3.86 7.5 1.3 7.2 Anhui Expressway-H 995 HK HKD 4.73 5.20 5.00 Hold Hold 5.7%1,253 0.36 6.3 0.6 5.9 Anhui Expressway-A 600012 CH CNY 5.71 3.90 4.10 Reduce Reduce-28.2%1,253 1.98 8.6 0.9 4.3 Bay Area Dev 737 HK HKD 3.90 5.20 4.60 Buy Buy 17.9%1,552 0.16 16.7 2.2 5.9 Sichuan Expressway-A 601107 CH CNY 3.89 2.30 2.40 Reduce Reduce-38.3%1,451 2.45 12.9 0.8 2.8 Source:Datastream,HSBC.Priced as of close at 6 Nov 2019.New tariff uncertainty on toll revenue outlook in 2020 2 Equities Transportation Infrastructure 8 November 2019 HSBCs China Railway and Expressway coverage Name Ticker Rating Last Price 3M chg(%)YTD chg(%)TP(lcy)Up/Dn side(%)Mkt Cap(USD bn)6M T/O(USD m)_ P/B _ _ ROE(%)_ _Yield(%)_ _ Net D/E(%)_ FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY20E Daqin Railway(A)601006 CH Buy 7.83 4.7-4.9 10.20 30.3 16.51 23.37 1.1 1.0 0.9 14.0 12.7 12.1 6.1 6.1 6.2-7-8-11 Guangshen Railway(A)601333 CH Hold 3.06 0.3-3.2 3.37 10.1 2.93 9.08 0.8 0.7 0.7 2.7 4.2 3.3 2.0 2.6 2.1-6-7-10 Guangshen Railway 525 HK Buy 2.54 4.5-13.3 3.64 43.3 2.93 0.71 0.6 0.5 0.5 2.7 4.2 3.3 2.6 3.5 2.8-6-7-10 Sichuan Expressway-H 107 HK Hold 2.33 4.0-2.9 2.60 11.6 1.45 0.24 0.4 0.4 0.4 6.8 5.9 6.0 4.8 5.2 5.4 93 79 69 Jiangsu Expressway-H 177 HK Hold 10.56 3.9-3.5 10.50 -0.6 7.42 2.49 1.8 1.8 1.7 14.9 14.1 12.9 4.9 5.0 5.0 52 56 47 Shenzhen Expressway-H 548 HK Buy 10.92 26.4 26.5 12.10 10.8 3.32 4.20 1.2 1.2 1.2 17.6 14.0 10.5 7.3 6.2 4.9 50 50 45 Zhejiang Expressway 576 HK Buy 7.02 0.4 2.5 9.50 35.3 3.96 3.86 1.2 1.3 1.1 15.7 17.6 17.3 6.9 7.2 7.8 71 86 67 Anhui Expressway-H 995 HK Hold 4.73 3.3 1.1 5.00 5.7 1.25 0.36 0.7 0.7 0.6 11.4 10.6 9.1 5.9 5.9 5.4-7 5 10 YueXiu Transport Infra 1052 HK Buy 7.40 26.5 25.4 8.80 18.9 1.58 2.40 1.1 1.0 1.0 11.4 12.7 11.8 5.0 5.9 5.9 42 30 18 Bay Area Dev 737 HK Buy 3.90 -3.9-1.3 4.60 17.9 1.55 0.16 2.2 2.2 2.2 12.4 12.5 13.1 8.5 5.6 5.7 100 82 68 Sichuan Expressway-A 601107 CH Reduce 3.89 8.4 11.8 2.40 -38.3 1.45 2.45 0.8 0.8 0.7 6.8 6.7 6.3 2.6 3.0 3.1 93 84 72 Jiangsu Expressway-A 600377 CH Hold 10.57 3.0 7.9 9.70 -8.2 7.42 6.75 2.0 2.0 1.9 14.9 14.1 12.9 4.4 4.4 4.5 52 56 47 Shenzhen Expressway-A 600548 CH Hold 11.01 20.9 22.6 11.20 1.7 3.32 6.45 1.4 1.4 1.3 17.6 13.6 10.1 6.4 5.5 4.4 50 50 45 Anhui Expressway-A 600012 CH Reduce 5.71 4.8-5.3 4.10 -28.2 1.25 1.98 0.9 0.9 0.8 11.4 10.6 9.1 4.4 4.3 4.0-7 5 10 Guangdong Provincial Express Development(A)000429 CH NR 8.01 5.1-4.5 NA NA 2.25 3.27 1.7 1.6 1.5 15.8 16.0 16.5 6.6 6.8 n/a n/a n/a n/a Guangdong Provincial Express Development(B)200429 CH NR 5.89 -3.1-1.3 NA NA 2.25 0.37 1.1 1.0 n/a 15.2 15.7 n/a 9.8 10.6 n/a n/a n/a n/a Indices HSCEI HSCEI IND 10,861 8.5 8.7 MSCI China MXCN IND 81 11.0 14.4 SSE Comp Ind SHCOMP IND 2,979 7.2 19.4 XWY H share average 8.0 5.2 1.4 1.4 1.3 14.2 13.7 12.6 6.0 5.8 5.7 58 59 49 XWY A share average 5.7 6.5 1.6 1.6 1.5 14.4 12.9 11.1 4.7 4.5 4.3 50 53 46 XWY Sector average 6.8 5.9 1.5 1.5 1.4 14.3 13.2 11.8 5.5 5.3 5.1 55 55 47 Railway operator average 4.1-5.7 1.0 0.9 0.9 11.1 10.5 9.8 5.1 5.3 5.2-7-8-11*Last Price updated on 6 November 2019.NR=not rated,NA=not applicable.*Sector averages are market cap weighted,XWY refers to expressway.Source:Refinitiv Datastream,HSBC estimates 3 Equities Transportation Infrastructure 8 November 2019 Jiangsu Expressway 7 Shenzhen Expressway 13 Sichuan Expressway 20 Zhejiang Expressway 25 Anhui Expressway 29 Bay Area Dev 35 Yuexiu Transport Infra 38 Disclosure appendix 42 Disclaimer 45 Contents Equities Transportation Infrastructure 8 November 2019 4 News updates for the expressway sector Several provinces announced they will hold hearings about the adjustment to pricing methods for expressway tolling in mid-November and December,such as Guangdong and Jiangsu provinces.A range of interested parties such as consumers,expressway operators,experts,etc will be invited to attend.10 Oct 2019 The Ministry of Transport announced the first batch of 13 pilot regions to implement the policy to strengthen Chinas competitiveness in the transport industry,including Shenzhen,Jiangsu,Zhejiang,Guangxi,Hebei,Liaoning,Shandong,Henan,Hubei,Hunan,Chongqing,Guizhou,and Xinjiang.24 Oct 2019 On 10 Oct,a highway road bridge overturned,which was caused by excessively overloaded trucks,in Wuxi,Jiangsu province.After this collapse,transportation authorities announced stricter inspections on overloaded trucks in Jiangsu,Zhejiang,Guangdong and another five provinces.Freight expenses have increased since more trucks are needed to ensure no overloaded conditions.25 Oct 2019 The Ministry of Transportation stated that,by 23 Oct 2019,the number of ETC users had reached 151.27 million nationwide,accounting for 79.26%of the full-year target.25 Oct 2019 The Ministry of Transport announced the completion of the facility construction of ETC gantry systems and the reconstruction of ETC charging channels;that is,24,588 ETC gantry systems and 48,211 ETC channels were set off.Testing on the charging networks across the nation would be the next task for the MOT.31 Oct 2019 Weekly completion percentage of ETC implementation in the main provinces in China 0%50%100%150%200%250%300%Aug 29-Sep 4Sep 5-11Sep 12-18Sep 19-25Oct 3-9Oct 10-16Oct 17-23GuangdongJiangsuZhejiangHenanSichuanAnhuiHunanHubeiGuangxiShanghaiTianjin Source:Ministry of Transport(MOT),HSBC 5 Equities Transportation Infrastructure 8 November 2019 YTD completion progress of ETC implementation in the main provinces in China 70%64%72%59%54%75%72%87%48%59%68%0%10%20%30%40%50%60%70%80%90%01,0002,0003,0004,0005,0006,0007,0008,0009,000Guangdong Jiangsu ZhejiangHenanSichuanAnhuiHunanHubeiGuangxi ShanghaiTianjin2019 new target*(k units)Installation of ETC YTD 2019*(k units)Installation rate*(%)-RHS Source:new target refers to amount needed to be fulfilled from 15 May 2019 to 31 Dec 2019.*Installation YTD refers to amount completed since 15 May 2019.*Installation rate=Installation YTD/2019 new target.Source:MOT,HSBC China expressway traffic volume Passenger cars-5.0%0.0%5.0%10.0%15.0%20.0%25.0%30.0%-1500150300450600750900Jun-18Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19Jul-19 Aug-19 Sep-19(mn)PV VolumePV yoy growth Source:MOT China expressway traffic volume Trucks-3.0%0.0%3.0%6.0%9.0%12.0%15.0%18.0%-50050100150200250300Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19(mn)Trucks VolumeTrucks yoy growth Source:MOT Equities Transportation Infrastructure 8 November 2019 6 Expressway operators stats summary Sep 2019 YoY FY19 YTD YoY Company guidance 2019 HSBC forecast Jiangsu Expressway-3.7%3.8%4.0%4%Zhejiang Expressway*2.0%1.5%organic growth 2%0%Shenzhen Expressway*13.1%6.3%organic growth 5%7%Sichuan Expressway-8.9%9.2%high-single-digit growth 9%Anhui Expressway*2.2%1.1%low-single-digit growth 2%Yuexiu Transport 7.0%2.9%mid-single-digit growth 4%Bay Area Dev 1.5%-0.8%single-digit growth-2%Source:Company reports;HSBC estimates*For Zhejiang Expressway,due to two toll assets,Shenjiahuhang and Zhoushan bridge,being consolidated from 2Q19,we expect total toll revenue growth for 2019 to reach 22.8%y-o-y and organic growth of-0.8%excluding the two toll assets.*For Shenzhen Expressway,due to lack of contribution from three toll assets from 2019,we expect total toll revenue to decline 13.9%y-o-y and organic growth of 3.6%excluding the three toll assets.*As of 3Q19 toll revenue data Expressway operators 3Q19 results summary(RMBm)Sichuan Jiangsu Shenzhen Anhui Zhejiang Revenue 1,598 2,661 1,486 762 3,058 Growth 7.0%6.4%1.6%-2.5%1.2%Toll revenue 1,009 2,112 1,248 734 2,132 Others 589 549 238 28 925 NPAT 287 1,277 574 298 1,140 Growth 10.9%9.70%4.0%0.5%24.4%Excluding one-off NPAT 274 1,244 512 296 Growth 19.5%9.8%32.9%0.6%Source:Company reports 7 Equities Transportation Infrastructure 8 November 2019 Satisfactory 3Q19 results:Jiangsu Expressways NPAT increased 10%y-o-y in 3Q19,better than market expectation.The companys core business toll revenue grew solidly in 3Q19,with 4%y-o-y growth,on track with the company guidance for 2019 at 4%y-o-y.Ancillary service revenue declined 7%y-o-y due to oil services decline but the company was active in communication with oil suppliers so to achieve a greater profit margin.Substantial property revenue recognition during the period is also the main reason for the total revenue increase(6%y-o-y).Greenfield project weighs on company earnings in near term:The company maintains its investment strategy on greenfield projects which is different to peers and creates investment risk,in our view.For instance,the company just announced a new greenfield project,Longtan Bridge,which requires the company to increase capital by RMB97.8m to RMB1,340m due to the construction cost increasing.The cost adjustment may result in a lower project return and additional funding requirement.In addition,the project loss during the ramping up period may also weigh on company earnings in the near term.The company currently has three major projects as a regional network under construction with a total investment of RMB19.7bn,targeted for completion in 2021.We think the earnings may continue to be under pressure until the new project is ramping up.However,the company still has room to increase the dividend payout to maintain a stable dividend payment in absolute terms.Fair value of the company,5%dividend yield:We make minor changes to FY19e and FY20e earnings of about 2%,but maintain our H/A-share TPs of HKD10.50 and RMB9.70 respectively.We maintain our Hold ratings on Jiangsu Expressway H-and A-shares.We think the companys core business remains solid but lack of visibility on returns for greenfield projects creates uncertainty for earnings.The company is likely to maintain its steady dividend payment growth on an absolute basis,implying the dividend yield should remain at about 5.0%for 2019e and 2020e.Jiangsu Expressway Jiangsu Expressways 3Q19 NPAT up 10%y-o-y,better than our expectation Core business toll revenue solid growth at 4%y-o-y YTD;increasing property recognition in 3Q19 contributed to total revenue growth Maintain H/A shares at Hold;minor adjustment of FY19-21e earnings with no change in H/A-share TPs of HKD10.50/RMB9.70 Equities Transportation Infrastructure 8 November 2019 8 Jiangsu Expressway 3Q19 results(RMB mn)3Q19 3Q18 YoY 9M19 9M18 YoY Revenue Tolling 2,112 2,026 4%5,891 5,619 5%Ancillary services 355 384-7%966 1,102-12%Property sales 178 75 138%590 873-32%Advertising,prop service fees&others 15 16-2%48 48 2%Total Revenue 2,661 2,500 6%7,496 7,642-2%Total operating costs-1,324-1,228 8%-3,666-3,942-7%Operating costs-1,112-1,019 9%-3,068-3,276-6%Business tax-27-21 25%-82-129-36%Selling expenses-9-8 11%-27-19 41%Administration-50-46 8%-136-132 3%Finance costs-127-133-5%-353-386-9%Add:Gains from changes in fair values 41 45-10%64 43 48%Investment income 281 215 31%759 945-20%Including:investments in associates and JCEs 186 177 5%541 461 17%Operating profit 1,658 1,531 8%4,653 4,688-1%Non-operating income 7 1 408%9 11-18%Non-operating expenses-4-6-35%-15-21-29%Profit Before Tax 1,662 1,527 9%4,647 4,678-1%Tax Expense-352-332 6%-1,004-943 6%Minority interest-32-31 2%-85-82 3%Net Profit After Tax(NPAT)1,277 1,164 10%3,559 3,652-3%EPS(RMB)0.2536 0.2310 10%0.7065 0.7249-3%Source:Company data,HSBC Earnings changes summary:We increase our 20