2024 earnings beat our forecast

Jiangsu Expressway (JSE) announced its 2024 results: Revenue rose 52.7% YoY to Rmb23.2bn, and operating revenue (excluding construction revenue) fell 2.9% YoY to Rmb12.33bn. Attributable net profit rose 12.1% YoY to Rmb4.95bn. The 2024 earnings beat our expectations as maintenance expenses of the toll road business were lower than we expected.

In 4Q24, revenue rose 155.1% YoY to Rmb9.14bn and net profit attributable to shareholders grew 119.6% YoY to Rmb827mn.

Trends to watch

Toll revenue flat; cost control effective. By business:

1) Toll roads: In 2024, revenue rose 0.2% YoY to Rmb9.53bn, gross profit rose Rmb422mn YoY and gross margin rose 4.3ppt to 58.9% due to lower maintenance expenses.

2) Supporting business: In 2024, revenue fell 5.7% YoY to Rmb1.74bn, with leasing revenue from service areas up 76.4% YoY, as service areas attracted a new round of investment. Oil product sales revenue fell 11.4% YoY.

3) Alternative energy business: In 2024, revenue rose 12.1% YoY to Rmb720mn, mainly driven by rising on-grid electricity generated by offshore wind power projects in Rudong.

Capex peak for main business; to serve as long-term growth driver. According to corporate filings, the Ningyang Yangtze River Bridge was opened to traffic in early 2025. In terms of projects that require ongoing funding, JES has the north connection project of the Ningyang Yangtze River Bridge (to be opened to traffic by end-2025), the expansion project of the southern section of Xiyi Expressway (to be opened to traffic by June 2026), the Xitai project, the Danjin project, and the northern section of Guangjing Expressway (all to be opened in 2028). Investment expenditure reached Rmb11.16bn in 2024. JEX expects its capex to be about Rmb9.37bn in 2025. We believe that reinvestment in the main business will extend the remaining service life of toll road assets, which will serve as long-term earnings growth drivers.

Dividend per share rising steadily. Earnings and dividend per share have increased almost every year since 2014, except for 2020-2022 when the traffic volume was dampened by the COVID-19 pandemic. However, the absolute amount of the annual dividend did not decline despite the pandemic. In 2024, the proposed dividend per share rose another Rmb0.02 to Rmb0.49/sh, implying a dividend payout ratio of 50%. Based on the historical dividend payout model and future capex, we believe the firm’s dividend per share may still rise steadily along with earnings growth, ensuring investment returns.

Financials and valuation

Given the effective cost control, we raise our 2025 earnings forecast 3.1% to Rmb5.12bn and introduce our 2026 earnings forecast at Rmb5.32bn. A- shares are trading at 15.3x 2025e and 14.7x 2026e P/E, and H-shares at 8.9x 2025e and 8.4x 2026e P/E. Given the steady increase in dividends, we maintain an OUTPERFORM rating for A-shares and raise our TP 8.9% to Rmb16.33 (implying 16.1x 2025e and 15.5x 2026e P/E), offering 5.1% upside. For H-shares, we maintain an OUTPERFORM rating and raise our target price 3.5% to HK$10.27 (9.5x 2025e and 9.0x 2026e P/E), offering 7.2% upside.

Risks

Disappointing economic growth; higher-than-expected capex.