The Zhitong Finance App learned that BOC Securities released a research report saying that in 2023, with changes in the risk appetite of the A-share market, those with high dividend margins will be favored by the capital market, and excess returns will be remarkable. Investors not only expected to receive a determined high-dividend, but also enjoyed significant excess benefits from rising stock prices. Among them, from the beginning of 2023 to January 5, 2024, the expressway sector's excess revenue in the transportation industry reached 26.68%, higher than the overall excess income level of the transportation industry of -11.06%. The bank recommended focusing on China Merchants Highway (001965.SZ), Wantong Expressway (600012.SH), Ning—Shanghai Expressway (600377.SH), Guangdong Expressway A (000429.SZ), and Gan-Guangdong Expressway (600269.SH).

The views of Bank of China Securities are as follows:

The highway sector is favored by the market, and the railway and highway index market is performing well.

From January 3, 2023 to January 5, 2024, the share of the highway sector in total market value compared to the transportation sector increased from 8.10% in early 2023 to 11.17%, indicating that the overall stock price performance showed a relatively upward trend. At the same time, the share of trading volume increased from 9.77% to 7.06pct to 16.83%, indicating that the sector is receiving more and more attention from the market in the transportation industry sub-sector from December 30, 2021 to January 5, 2024. The absolute yield of the transportation sector index is only 10.06%. was -18.66%.

Most expressway listed companies have clearly recovered their performance, and traffic growth is obvious.

According to various companies' announcements, judging from the recovery of net profit to the mother of six listed companies with operating mileage of more than 600 kilometers, including Wantong Expressway, Shandong Expressway, Ninghai Expressway, Guangdong Expressway A, China Merchants Highway, and Gan-Guangdong Expressway, the net profit of each company maintained a relatively steady increase before the pandemic. The net profit of each company declined sharply year-on-year in 2020 and 2022 due to the impact of the epidemic, and showed a clear recovery in the first three quarters of 2023.

The valuation of the expressway sector increased in 2023 and is still within a reasonable range.

Combined with the valuation trend of the Expressway sector and the Shanghai Composite Index from January 3, 2023 to January 8, 2024, the PE premium level of the former showed an upward trend throughout the year. As of January 8, 2024, the premium level reached -4.07%, up 10.19 pcts from the beginning of 2023. The valuation of the expressway sector has increased overall as market attention continues to increase.

Focus on investment opportunities for high-quality targets with undervalued, high dividends and stable performance in the industry.

Currently, the overall valuation of the highway sector is expected to rise amid declining risk-free interest rates and market capital embracing high-certainty assets. Five listed companies, including Shandong Expressway, Wantong Expressway, Ning—Shanghai Expressway, Guangdong Expressway A, and China Merchants Highway, have relatively high valuations of high-quality road production resources and obvious location advantages, which also reflects the value effect of high-quality road products. The valuation level of the Gan-Yue Expressway is in the lower quantile range. According to individual stock dividend yield estimates, the Gan-Yue Expressway, the Wan-Tong Expressway, the Ninghu Expressway, and Guangdong Expressway A performed well. The four companies have good road production and location advantages, and have road and bridge operations as their main business, and can obtain stable and repaired performance.

Risk warning: Economic recovery falls short of expectations; rising oil prices and labor costs; changes in highway toll policies.