Guotai Haitong: maintaining "hold" rating on JIANGSU EXPRESS (00177), raising target price to 13.54 Hong Kong dollars.

Guotai Haitong released a research report stating that considering the impact of the dividend cycle of Bank of Jiangsu, the profit growth of JIANGSU EXPRESS (00177) in 2026 is confirmed. Taking into account the gradual completion of the reconstruction and expansion of the Yangtze River Expressway, the company's net profit forecast for 2026-27 is lowered to 4.9-5.0 billion yuan, with an additional forecast for 2028 of 5.2 billion yuan. The target price is raised to 13.54 Hong Kong dollars, corresponding to a 12 times PE ratio for 2026, maintaining a "hold" rating. Guotai Haitong's main points are as follows: Improvement in core business in 2025, profit affected by dividend timing In 2025, the company's net profit attributable to shareholders was 4.6 billion yuan, a year-on-year decrease of 7%. Excluding the impact of the dividend timing of Bank of Jiangsu, it is estimated that the company's profit increased by 2% year-on-year. The company's core business improved, with operating gross profit margin increasing by 0.84 percentage points year-on-year, including: 1) the company's traffic volume decreased by 4% year-on-year, with passenger cars -5% and freight cars flat. The main road of Shanghai-Nanjing benefited from the diversion of freight along the Yangtze River, and the company's toll revenue increased slightly year-on-year, ensuring resilient demand for passage due to its location advantage. The toll fee growth rates in Q1-Q4 were +2%/+1%/0%/-2% respectively, and the closures of connecting road sections affected the Zhenli/June official Xin party Sicheng expressways, leading to pressure on toll fee growth rates in the second half of the year. 2) Financial expenses decreased by 13% year-on-year, with the company's comprehensive borrowing cost in 2025 at 2.26%, a decrease of 0.52 percentage points year-on-year. 3) The important component of the company's investment income is the dividend from Bank of Jiangsu, with an additional interim dividend in 2024, confirming a dividend of 0.608 billion yuan that year (including 2023 full year+2024 H1), and confirming a dividend of 0.168 billion yuan in 2025 (2024 H2). It is expected to confirm the full year 2025 for the 2026 year, with changes in the dividend cycle affecting the 2025 performance. Toll fee growth in Q1 of 2026 better than the industry, confirmation of Bank of Jiangsu dividend to thicken annual profits In Q1 of 2026, the company's net profit attributable to shareholders was 1.37 billion yuan, a year-on-year increase of 13%. 1) In Q1, the company's traffic volume decreased by 4% year-on-year, with toll revenue increasing by 4% year-on-year, better than the industry, mainly due to the benefit of parallel road diversion of Wufengshan Bridge. Toll fees on the main Shanghai-Nanjing road remained flat in Q1, as the parallel Yangtze River Expressway reconstruction and expansion shifted from half-lane closure to segmented control, with the diversion effect waning. It is expected that the trend of increased toll fees for the whole year will continue, and the location advantage will ensure that the core business operates better than the industry. 2) In Q1, Bank of Jiangsu's interim dividend for 2025 was confirmed at 0.26 billion yuan, and incremental investment in dividend confirmation is expected to ensure the company's profit growth. 3) Financial expenses decreased by 11% year-on-year in Q1, and it is expected that the decrease will continue in Q2. Dividend amount not adjusted, dividend yield back to attractive range The company increased its earnings-per-share dividend to 0.47/0.49 yuan in 2023-2024, keeping it at 0.49 yuan per share in 2025 without reduction, resulting in a 4 percentage point increase in the dividend ratio to 54%. Highways are a typical domestic demand theme, and cash flow will grow steadily, making the company's dividend certain. If the company maintains a cash dividend of 0.49 yuan per share in the next three years, the estimated dividend yield is 5.0%. Risk factors Economic fluctuations, industry policies, reinvestment risks, market style switches, etc.