Southwest: First coverage of YUEXIUTRANSPORT (01052) with a "buy" rating and a target price of 5.73 Hong Kong dollars.

Southwest released a research report stating that YUEXIUTRANSPORT (01052) became the first domestic road H-share stock listed in Hong Kong in 1997. The bank is optimistic about the company becoming a leading transportation infrastructure asset management company in the country, with a first-time coverage and a "buy" rating. The target price is HK$5.73. Southwest's main points are as follows: The company continuously optimizes its assets, continuously strengthens and expands its main business of toll roads Benefiting from the inclusion of Pinglin Expressway in November 2024, in the first half of 2025, the company's overall revenue increased by 14.9% to 2.099 billion yuan; 2) On December 31, 2025, the company announced that the transfer of 85% equity of the Qinbin Expressway project to YueXiu Group was approved at a special shareholders' meeting; 3) Since 2010, the company has maintained stable and sustainable dividend payouts, with dividends totaling approximately 50% to 60% of shareholders' attributable profits annually. The first road H-share stock listed in Hong Kong, one of the four core industries under the trillion-dollar state-owned enterprise YueXiu Group As one of the few listed companies in the domestic road sector without a trading background, after many years of development, the company has controlling, participating, and managing a total of 18 expressway, bridge, and port projects, with a total mileage of approximately 1039.54 kilometers. In the first half of 2025, the company's overall revenue increased by 14.9% to 2.099 billion yuan, and net profit attributable to shareholders increased by 14.9% to 361 million yuan. Revenue growth is slowing down, but costs continue to rise, and the revenue gap may be broken through policy iteration and business diversification China's road industry has entered a mature stage, with more than 70% of the mileage targets proposed in the "National Comprehensive Three-Dimensional Transportation Network Plan Outline" already completed. Although the industry's overall revenue has been steadily recovering after the epidemic, the cost of building new roads is rising, and there may still be a revenue gap in the future. Judging from various related policies such as the "Revised Draft of the Regulation on Toll Road Management," the new version of the Regulation on Toll Road Management may be issued soon, with the trend of breaking the original toll period. Combining policy and market demand, the bank believes that in the future, China's toll road companies will actively participate in the reconstruction and expansion, acquire high-quality mature road assets, and promote business diversification based on their core business. The investment layout is extensive, the road asset quality is high, and the fundraising channels are smooth The company has formed a unique asset layout, with obvious regional advantages where the road assets are located and good operating efficiency. In the past five years, YueXiu Group has incubated road assets worth nearly 25 billion yuan. In 2021, the company successfully established a REITS platform, marking the basic formation of the company's "incubation platform, listed company, and public REITs" three-platform structure. With the benign interaction of the three platforms, the company can use multiple financing tools, raise funds from multiple channels, improve the financial development model of the "investment, financing, construction, management, and exit" full chain, reduce the company's asset-liability ratio, and optimize the company's asset structure. Profit forecast and rating: The bank uses PB to conduct relative valuation of the company, giving the company a 0.7x PB for 2026 based on the valuation and business layout of benchmark companies, corresponding to a target price of 5.21 yuan. Calculated using the RMB: HKD exchange rate of approximately 1:1.1 in December 2025, this is HKD 5.73. Risk warning: Industry policy risks, competition risks in parallel roads, investment decision risks, natural disaster risks, uncertainties in the consolidation process, and risks of progress falling short of expectations, etc.