中国收费公路：在经济放缓的情况下收费公路行业是否仍处于防御状态

1、 cGlobalResearch23 January2019Chinese Toll Road SectorIsthetollroadsectorstilldefensiveinaneconomic slowdown?Turning cautious on the toll road sector despite favourable policyWe are downgrading our sector view on the Chinese toll road sector from positive to neutral.Whileweremainpositiveonpolicysupp

2、ortandbelievethatthemarketfailsto price this potential positive (see HYPERLINK /shared/d2MxOZwXnU3 link) proposed at end-2018, we are cautious of earnings downside risks from traffic slowdown as a result of weak auto sales and HYPERLINK /shared/d2adIHebhpUFPRD highway-to-railway diversion impact. We

3、 downgrade Jiangsu Expressway (JSE) (both A- and H-shares) from Buy to Neutral, after significant share price outperformance in 1. We exct JSEs 2E vnd yes f ce to % to ve wsde protection.Ourmost-preferredstockisZhejiangExpressway(ZJE),ouronlyBuy-rated stock in the sector.Both passenger and truck tra

4、ffic facing downside risks to economic slowdown Followingourrecent HYPERLINK /shared/d2TTOyu0v8PzbY rating/earningsdowngradeofSDHStoreflectthenegativeimpact of HYPERLINK /shared/d2adIHebhpUFPRD highway-to-railwayconversion,weareloweringourearningsestimatesonJSEand ZJE to reflect more conservative tr

5、affic growth assumptions (especially onpassenger vehicles, PV). We expect both weak auto sales (down c15% in Q418) and a weak economy to drive deceleration of PV traffic growth. In addition, we expect potential trafficYoYdeclinesinQ119,reflectingacarry-overeffectfromfront-loadingofexports inQ418atpo

6、rtstoavoidthenegativeimpactsofhigherexporttariffsstartinginQ119.However, policy is supportive of long-term developmentWeviewthe HYPERLINK /shared/d2MxOZwXnU3 newtollroadmanagementordinanceasapositivesignaltohelpremove policyoverhangaroundtollroadtariffcuts,includingtermssuchas:1)concessionscan excee

7、d30years;2)concessionscanbeextendedforcapexincurredontoll-roadlane- expansion;3)compensationwillbeawardedforgovernment-proposedtollfreeand/or tariff reduction policies; and 4) a differential tariff scheme can be applied to different situations.Wealsoexpecttollroadoperatorswillbemorefocusedonthecoret

8、ollroad business following this new ordinance.Stock picks: most preferred ZJE; least preferred Shandong Hi-speed (SDHS)We cut our 2019/20E earnings by 3%/5% for JSE and 6%/8% for ZJE, while we downgrade JSE (both A- and H-shares) from Buy to Neutral. We maintain our Buy ratingonZJEasourmost-preferre

9、dtollroadoperatorforitsattractiverisk-reward,and itsrecentlyproposedroadacquisitionsshouldclearmarketconcernsondiversification and drive a re-rating.Valuation summary of Chinese toll road operatorsEquitiesChinaIndustrialRobinEquitiesChinaIndustrial HYPERLINK mailto:bin.xu bin.xu+86-213-8668872Mkt ca

10、pRatingRatingPTPE(x)P/BV(x)Div.yld(%)ROE(%)EPSgrowthNameRic code(US$ bn)(old)(new)(LC)(LC)2019E2020E2019E2020E2019E2020E2019E2020E2019E2020EZJE0576.HK4.4BuyBuy9.807.914.815.06%9%JSE - A600377.SS7.4BuyNeutral10.609.9815.715.00%2%JSE - H0177.HK7.4BuyNeutral12.3011.6015.715.00%2%SDHS600350.SS3.1SellSel

11、l3.804.3310.85.57%-13%Note: price data as of 22 January 2019. Source: Thomson Reuters, UBS-S estimates HYPERLINK / This report has been prepared by UBS Securities Co. Limited.ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ONPAGE31. UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchre

12、ports.Asaresult,investorsshouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.ContentsPIVOTALQUESTIONS6 HYPERLINK l _TOC_250005 Q: What is the i

13、mpact of the new toll road management ordinance proposedinend-2018?6 HYPERLINK l _TOC_250004 Q: Will a weak economy and sluggish auto sales affect traffic and toll revenuegrowth?9 HYPERLINK l _TOC_250003 WHATSPRICEDIN?12 HYPERLINK l _TOC_250002 Companypages15 HYPERLINK l _TOC_250001 JiangsuExpresswa

14、y16 HYPERLINK l _TOC_250000 Zhejiang ExpresswayCoLtd22RobinXu HYPERLINK mailto:bin.xu bin.xu+86-213-8668872Chinese Toll Road SectorUBS-S Research THESIS MAPa guide to our thinking and whats where in this reportMOSTFAVOUREDLEAST FAVOUREDZhejiang ExpresswayShandongHi-speedPIVOTALQUESTIONSQ: How will H

15、2R conversion affect variousindustries?We expect highway-to-railway (H2R) conversion to help the government achieve its 30% railway freight volume growth target during 2017-20. However, we estimate lower railway freight turnover growth of 23% during 2017-20. We expect railway companies to benefit fr

16、om H2R conversion, while heavy-duty truck (HDT) makers and toll road operators could be negatively affected. HYPERLINK /shared/d2adIHebhpUFPRD Howwillhighway-to-railwayconversionaffectfreighttransportationinChina?1/14/2019Q: What is the impact of the new toll road management ordinance proposed in en

17、d-2018? We believe the positives of the proposed potential ordinance will outweigh the negatives. We expect toll-road operators to benefit in the form of compensation (likely cash or concessionextensions)fromthegovernment-imposedtoll-freepolicyandsignificantcapexincurredinbuildingtollroads. HYPERLIN

18、K l _bookmark1 moreQ: Will a weak economy and sluggish auto sales affect traffic and toll revenue growth? Yes.Weexpectbothsluggishautosalesandaweakeconomytodrivedecelerationoftraffic andtollrevenuegrowth,especiallyinpassengervehicles.WeexpectQ119trafficgrowthtobenegative,althoughfull-yeargrowthshoul

19、dremainpositive. HYPERLINK l _bookmark2 moreUBS-SVIEWBenefitingfrompreferentialpolicy,whiletrafficgrowthdecelerates.Weremainconfidenton the potential benefits from the potential new toll road policy, and this may likely come in 2019. However, we also expect traffic growth deceleration in 2019 follow

20、ing weaker economic growth and auto sales.EVIDENCETraffic and toll revenue growth decelerated in November/December 2018, accompanied by c15% fall in Q418 auto sales. Our detailed analysis of the economics of the toll road industry indicates significant deterioration in the past five years, and some

21、provinces do not generate enough toll revenue to cover interest expenses.WHATSPRICEDIN?Uncertainties on tariff cuts and resilient traffic growth. We think the market has concerns on tariffcutsasthegovernmentencouragessavingoflogisticscosts;whileitalsoexpectstrafficgrowth toremainresilienteveninaneco

22、nomicslowdown. HYPERLINK l _bookmark3 moreListed toll-road operators in ChinaSource: Company data, UBS-S estimatesChinese Toll Road SectorUBS-S ResearchCOMMENTARY HYPERLINK l _bookmark0 return Jiangsu Expressway earnings forecast changesWe expect the currently sluggish traffic and toll revenue growt

23、h momentum to continuein2019.Asaresult,welowerour2019/20EPSestimatesby3%/5%.We believethemarkethasnotpricedinpotentialtrafficdecelerationin2019,andmay alsohavefailedtoobservethefullbenefitsofthepotentialtollroadmanagement ordnne. JSE-s shre prce gnfanty outprformed the market n 2018 and its 12-month

24、 forward dividend yield is around 1 SD below its 10-year historical average, hence we downgrade JSE-H from Buy toNeutral.We lower our DCF-based price target from HK$13.00 to HK$12.30 (WACC from 6.5% to 6.6%).Figure 1: Jiangsu Expressway earnings forecast changes2018E2019E2020E(Rmbm)OldNew%OldNew%Old

25、New%Net revenue9,8829,8720%10,23010,036-2%10,61110,429-2%Toll road7,4757,4450%7,7477,558-2%8,0107,804-3%Ancillary services1,6021,6111%1,6821,6921%1,7331,7421%Property sales9049040%904876-3%9789780%Advertising62620%63630%63630%COGS(4,479)(4,504)1%(4,693)(4,718)1%(4,926)(4,965)1%Gross profit5,4045,368

26、-1%5,5375,318-4%5,6855,464-4%Gross margin55%54%-0.3ppts54%53%-1.1ppts54%52%-1.2pptsAdmin expenses(216)(216)0%(218)(218)0%(220)(220)0%EBIT5,1885,152-1%5,3195,100-4%5,4655,244-4%EBIT margin52%52%-0.3ppts52%51%-1.2ppts52%50%-1.2pptsFinancial expenses(496)(494)0%(423)(421)0%(401)(400)0%Investment income

27、 from associates/JV5956113%6206342%6366482%Profit before tax5,7905,737-1%5,5925,354-4%5,7755,532-4%Tax(1,242)(1,128)-9%(1,213)(1,085)-11%(1,203)(1,172)-3%Total minorities(112)(112)1%(109)(106)-2%(113)(108)-4%Net profit4,4374,4971%4,2704,162-3%4,4604,252-5%EPS (Rmb)0.880.891%0.850.83-3%0.890.84-5%Adj

28、usted EPS (Rmb)0.820.831%0.850.83-3%0.890.84-5%DPS (Rmb)0.490.47-5%0.490.47-4%0.510.49-5%Source: UBS-S estimatesZhejiang Expressway earnings forecast changesWe are positive on the long-term benefits from the new toll road management ordinanceintermsofconcessionextensionsandincreasedinvestmentreturns

29、on tollroadinvestments.Therecentlyannouncedtollroadacquisitions(seepage HYPERLINK l _bookmark10 26- HYPERLINK l _bookmark11 27) should clear market concerns on diversification and drive a re-rating of the stock,asweexpectthecompanytobemorefocusedontollroadsinthefuture.In addton, we see tte downsde r

30、k to ZJEs urrent didend eld of cloe to 6% in 2019E, which looks attractive.We cut our 2019/20 earnings estimates for ZJE by 8%/6% to reflect: 1) our more conservative traffic assumptions; 2) 15% discount on tolls for electronic toll collection (ETC) trucks; and 3) rising financial expenses from the

31、acquisition of ShenjiahuhangExpresswayandZhoushanBayBridge.Weloweroursum-of-the- parts-based price target from HK$10.60 to HK$9.80. Our valuation comprises HK$9.40/share for toll roads, HK$1.50/share for securities business and HK$0.67/share for banking business. We apply a 15% conglomerate discount

32、 to the companys NAV.Figure 2: Zhejiang Expressway earnings forecast changes2018E2019E2020E(Rmb m)OldNew%OldNew%OldNew%Net revenue9,6029,540-1%9,99210,4915%10,33611,71813%Toll road6,3866,324-1%6,6777,1968%6,8098,21221%Securities business3,1093,1090%3,2053,184-1%3,4143,392-1%Commission1,6081,6080%1,6

33、081,6080%1,7371,7370%Interest income1,5011,5010%1,5971,576-1%1,6771,655-1%Other operations1071070%1101100%1141140%COGS(4,430)(4,427)0%(4,487)(4,999)11%(4,645)(5,741)24%Gross profit5,1725,113-1%5,5055,4920%5,6915,9775%Gross margin54%54%-0.3ppts55%52%-2.7ppts55%51%-4.1pptsSG&A(108)(108)0%(119)(130)9%(

34、131)(140)7%EBIT5,0645,005-1%5,3865,3620%5,5605,8365%EBIT margin53%52%-0.3ppts54%51%-2.8ppts54%50%-4.0pptsNet finance cost(812)(767)-6%(719)(1,104)53%(618)(1,164)88%Securities investment gains2002000%2002000%2002000%Other income/expenses2482480%52520%52520%Share of profit of associates/JV4444440%6166

35、160%6446440%Profit before tax5,1435,1290%5,5355,126-7%5,8395,569-5%Tax(1,175)(1,171)0%(1,230)(1,137)-8%(1,299)(1,226)-6%Total minorities(527)(523)-1%(551)(545)-1%(548)(572)4%Net profit3,4413,4350%3,7543,445-8%3,9923,771-6%-Securities2262260%2422410%2652630%EPS (Rmb)0.750.750%0.820.75-8%0.870.82-6%Ad

36、justed EPS (Rmb)0.730.71-2%0.820.75-8%0.870.82-6%DPS (Rmb)0.390.390%0.420.39-8%0.450.42-6%Source: UBS-S estimatesChinese Toll Road SectorUBS-S ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 return Q: What is the impact of the new toll road management ordinance proposed in end-2018?UBS-S VIEWWebelie

37、vethepositivesoftheproposedpotentialordinancewilloutweighthe negatives. We expect toll road operators to benefit in the form of compensation (likely concession extensions) from the government-imposed toll-free policy and the significant capex incurred for tollroads.EVIDENCEOur detailed analysis of t

38、he financials of the toll-road industry in China indicatessignificantlossesacrossChina,andinextremecasestollrevenueis not able to cover the interest expense on debt. The Ministry of Transport published a new draft on toll road management ordinance on 20 December 2018andhighlightedconcessionscanexcee

39、d30yearsandcompensationwill be awarded for toll-free and/or tariff reductionpolicies.WHATS PRICED IN?Wethinkthelengthydelayintheissuingoftheordinancehasloweredmarket expectationsonitspotentialpositives.Meanwhile,webelievethemarkethas overlooked the long-term impact of the new ordinance on toll road

40、operators since they have more incentives to build new roads and/or acquire existing roads.Toll-road operators to benefit from the new ordinanceThe Ministry of Transport published a new draft toll road management ordinance and has been soliciting public opinions between 20 December 2018 and 20 Janua

41、ry 2019. This new draft was very similar to the previous draft published in 2015andweviewthisasapositivesignaltohelpremovepolicyoverhangaround toll road tariff cuts.End-2015: MoT made furtherrevisions on the Ordinance and submitted to the State CouncilJul-17: State Council, NDRC, andMoF drafted the

42、Ordinance on PPP in the Infrastructure and Public Service SectorsMay-18: State Councilproposed to remove toll stations at provincial bordersDec-18: MoT published a new draft Toll Road Management Ordinance and solicited public opinions8-May-13: MoT posted a draft revision regarding the Ordinance1-Nov

43、-04: Effective21-Jul-15: MoT launched a press conference to introduce a new revised draft policy on the Ordinance18-Aug-04: Toll Road Management Ordinance approved by the State CouncilJul-16: MoF-led legislation of PPP and NDRC-led legislation of concession, submitted to the State CouncilEnd-2015: M

44、oT made furtherrevisions on the Ordinance and submitted to the State CouncilJul-17: State Council, NDRC, andMoF drafted the Ordinance on PPP in the Infrastructure and Public Service SectorsMay-18: State Councilproposed to remove toll stations at provincial bordersDec-18: MoT published a new draft To

45、ll Road Management Ordinance and solicited public opinions8-May-13: MoT posted a draft revision regarding the Ordinance1-Nov-04: Effective21-Jul-15: MoT launched a press conference to introduce a new revised draft policy on the Ordinance18-Aug-04: Toll Road Management Ordinance approved by the State

46、 CouncilJul-16: MoF-led legislation of PPP and NDRC-led legislation of concession, submitted to the State Council2001200220032004200520062007200820092010201120122013201420152016201720182019Concession lift can be extended to beyond the maximum 30 years currentlySource: Ministry of TransportA few item

47、s worth highlighting from the new draft include: 1) concessions can exceed30years;2)concessionscanbeextendedforcapexincurredontollroad lane expansion; 3) compensation will be awarded for government-proposed toll- free and/or tariff reduction policies; and 4) a differential tariff scheme can be appli

48、ed on vehicle types, certain toll road sections, travelling time, payment methods, and congestion/service/traffic levels. In addition, we noticed some interestingsubtlechangesinthenewdraft,including:1)concessionsexceeding30 years do not require additional approvals; and 2) compensation methods were

49、clearlystatedasconcessionextensionsand/orfiscalsubsidies.Our sensitivity analysis of the three toll-road operators under UBS coverage indicatesthataone-yearconcessionextensionwouldliftourvaluationsby4-6%.Figure 5: Scenario analysis of concession extension impact on valuations7.0% 6.2%6.0%5.0%4.0%3.0

50、%2.0%1.0%0.0%3.8% 3.5% 3.3%3.1% 3.1%2.3%1.7%1.2%3.7% 3.4%3.1% 2.8%2.6%1.7%1.1%0.7%5.4%5.0% 4.7%4.4%3.1%2.2%1.5%1-year2-year3-year4-year5-year10-year15-years20-years1-year2-year3-year4-year5-year10-year15-years20-years1-year2-year3-year4-year5-year10-year15-years20-yearsJSE-(H/A)ZJESDHS1-year2-year3-

51、year4-year5-year10-year15-years20-years1-year2-year3-year4-year5-year10-year15-years20-years1-year2-year3-year4-year5-year10-year15-years20-yearsSource: UBS-S estimatesToll road industry has suffered in recentyearsDespite toll revenue increasing 79% (a 9% CAGR) from Rmb286bn in 2010 to Rmb513bn in 2

52、017, the balance of income to expenditure (defined as revenue minus debt repayment, interest expense, maintenance expense, operation expense,taxes,upgradecostofroadandancillaryfacilities,andotherexpenses) recordedalossofRmb403bnin2017fromnetincomeofRmb3bnin2010.While this number witnessed a 3% YoY d

53、ecrease in 2017 for the first time since 2010, the absolute amount is still substantial.Figure 4: Financial results summary for toll roads in China (Rmb bn)Significant losses from toll roadsTotal investmentDebt outstandingRevenueEBITDACash profit before taxBalance of income and expenditure20103,6512

54、,291286177NA32011NANA318NANA(32)2012NANA328NANA(57)20135,4433,43136524978(66)20146,1453,84539226454(157)20156,9494,44941027550(319)20167,5864,81545531584(414)20178.2345,284513358108(403)Note:EBITDA=revenueminusmaintenanceexpense,operationexpense,taxes,andotherexpenses;Cashprofitbeforetax=revenueminu

55、smaintenanceexpense, operation expense, taxes, other expenses, and interest expenses; Balance of income and expenditure = revenue minus maintenance expense, operation expense, taxes, otherexpenses,interestexpense,debtrepayment,andupgradecostofroadandancillaryfacilities(onlyfor2015-17)Source: Ministr

56、y of Transport, local transport departmentsIn extreme cases, some provinces do not generate enough toll revenue to cover their interest expenses (eg, Heilongjiang and Qinghai), not to mention various other toll road expenses and debt repayments.Figure 5: Toll road revenue as a percentage of outstand

57、ing debt (2017)Toll roads in some provinces do not generate enough revenue to cover interest expenses60% 50%40%30%20%10%ShanghaiJiangsuShandongZhejiangAnhuiGuangdongBeijingLiaoningJiangxiHenanXinjiangNingxiaChinaTianjinHebeiSichuanHubeiInner MongoliaGuangxiChongqingShanxiGansuShaanxiYunnanGuizhouHun

58、anFujianJilinHeilongjiangQinghai0%ShanghaiJiangsuShandongZhejiangAnhuiGuangdongBeijingLiaoningJiangxiHenanXinjiangNingxiaChinaTianjinHebeiSichuanHubeiInner MongoliaGuangxiChongqingShanxiGansuShaanxiYunnanGuizhouHunanFujianJilinHeilongjiangQinghaiNote:Shandong=totalminusthesumofotherprovinces,because

59、provinciallevelofficialdatahasnotcomeoutyet. Source: Ministry of Transport, local transportdepartmentsFigure6:Interestexpensecoverageratio(2017)Figure7:Debtrepayment/interestcoverageratio(2017)10.0 x 9.0 x8.0 x7.0 x6.0 x5.0 x4.0 x3.0 x2.0 x1.0 xShanghai Jiangsu Shandong ZhejiangAnhuiGuangdongBeijing

60、 Shanghai Jiangsu Shandong ZhejiangAnhuiGuangdongBeijing Jiangxi Liaoning Henan Ningxia Xinjiang SichuanTianjinGuangxiHebei Inner Mongolia Fujian Jilin 2.5x 2.0 x1.5x1.0 x0.5x Jilin Inner MongoliaFujian Note:Interestexpensecoverageratio=tollrevenue/interestexpenses;onlyshow provinceswithavailabledat