Shenzhen International has a stable dividend policy, although there is a mismatch between the deadlines of cash flow and profits, it still has the ability to maintain the dividend ratio.
The Zhongjin issued a research report that Shenzhen International (00152) is rated outperform in the industry. It is estimated that the company's EPS for 2024-2025 will be HKD 1.13 / HKD 1.49 respectively, with a CAGR of 37.0% and a target price of HKD 7.61. The market is worried about the sustainability of the company's dividends. The bank believes that the appreciation of the land value and the development and operation income of the Southern China Logistics Park may span the next 6-8 years, and the company still has the ability to maintain the dividend ratio despite the mismatch between the deadlines of cash flow and profits in the past dividend policy.
CICC's main points are as follows:
The transformation of the Southern China Logistics Park is in place and the value of land is released again.
The company signed a land consolidation supervision agreement with the Longhua District Government of Shenzhen on the first phase of the Southern China Logistics Park, which covers an area of approximately 0.53 million square meters. According to the agreement, Southern China Logistics Park will receive a demolition compensation of CNY 1.058 billion and a land use right of 0.1087 million square meters (with a volume area of approximately 0.6942 million square meters). Referring to the Qianhai project, the bank estimates that the land appreciation and residential development income of the Southern China Logistics Park project is expected to reach CNY 13.2-15.5 billion, with a release period of 6-8 years in the future.
The stable basic profit of the business is stable.
1) Toll roads and eco-friendly concepts: Shenzhen Expressway Corporation is the main component of the company's basic profit. The bank believes that with the opening of the second phase of the Yangtze River this year, performance is expected to be stable and increasing; 2) Logistics park and logistics services: The CAGR of logistics park income from 2017 to 2023 is 17.9%. According to the company's announcement, there are about 1.534 million square meters of logistics port to be put into operation in 2024-2025. The bank believes that it is expected to support the continuous release of growth in the logistics park business. In addition, REITs for public offering are expected to increase income in 2024.
The dividend policy is stable, and the dividend yield is attractive.
The company’s dividend policy is stable, with a cumulative dividend of HKD 15.65 billion from 2013 to 2023. The average dividend ratio in the past five years is 51.0%. Based on this year's profit forecast (including the bank's estimate of the land appreciation income of Southern China Logistics Park released this year and next year, which is about HKD 2/3.1 billion), assuming a dividend ratio of 50%, the current price corresponds to a dividend yield of 9.0% / 11.8% in 2024/2025, which is quite attractive.
Risk
Risks include slower-than-expected economic growth, lower-than-expected land value and progress of the South China Logistics Park, and lower-than-expected property sales.
