The Zhitong Finance App learned that Guotai Junan released a research report saying that the cumulative increase in stock prices of high-dividend expressway companies in 2023-23 is remarkable, and it is expected that market preferences will continue to dominate earnings space in 2024. Cash flow in the expressway industry is stable and dividend rates are determined, and an increase in holdings is rated. It is recommended to select highway targets with obvious location advantages, perfect regional road networks, and limited reinvestment requirements; high dividends are expected to continue; as well as those with excellent highway investment and operation companies with the ability to select and acquire high-quality road products from all over the country and actively manage to avoid local influence.

▍ Guotai Junan's main views are as follows:

In 2023, high dividends were favored by the market, and the expressway surplus earnings were remarkable.

In 2023, as the risk appetite of the A-share market changed, high dividend targets were sought after by the capital market, and excess returns were remarkable. Investors not only expected to receive a determined high-dividend, but also enjoyed significant excess benefits from rising stock prices. Among them, the highway sector in the transportation industry is favored by the market, with excess earnings ranking first. Since the beginning of 2023, the highway sector's excess revenue has reached 24%, which is higher than the overall excess income level of -10% in the transportation industry.

Currently, there are three types of high dividend targets in the transportation industry.

The dividend yield depends on the dividend rate and PE valuation level. Among them, the long-term dividend rate is generally inversely related to the industry's return on reinvestment, while the PE valuation level reflects the market's unanimous expectations of the company's future profit trends. Currently, the transportation industry's high dividend stocks are mainly concentrated in three sub-sectors.

(1) Shipping companies: Very low PE, heavy asset cycle industry. The boom in 2021-22 set a record, and the boom returned to a new normal in 2023. The next two years will need to absorb the pressure of new ships; (2) Large supply chain operators: low-PE, capital-intensive midstream industry, the essence of supply chain finance. Profitability in 2023 is under pressure, and high ROE drives continued capital demand; (3) Highways: lower PE, stable return to the infrastructure industry. Cash flow stabilized in 2023, reinvestment risk guarantees continued high dividends, and it will still be the preferred choice for high dividends.

Cash flow on expressways is stable, and high dividends continue.

As one of the affected industries during the pandemic, traffic demand recovered rapidly in 2023. According to estimates, most traffic of the same caliber on major highways has resumed growth, toll prices are basically stable, profitability has recovered, and stable cash flow will continue to be achieved. Among them, road production assets of some expressway companies have increased in recent years, driving impressive performance growth rates. At the same time, expressway toll periods have been extended in many places to basically compensate for the impact of toll reduction policies during the epidemic.

In the 14th Five-Year Plan, the whole country will continue to improve the structural functions and improve the quality of road networks. Listed companies are generally actively upgrading and expanding high-quality road products to extend the charging period, which will effectively deal with the risk of reinvestment caused by a limited period of time and falling returns on new roads, and high dividends will continue. If the limited toll period policy for expressways is revised in the future, it is expected that the return on investment and long-term investment value of the industry will be systematically enhanced.

Risk warning:

Economic fluctuation risk, reinvestment risk, policy risk, market style change, etc.