研究报告全文：MN27Jan2023CMBInternationalGlobalMarketsEquityResearchInitiationYuexiuTransport1052HKGrowthformulaOrganicgrowthAssetinjectionSpin-offviaInfrastructureREITTargetPriceHK700WebelievethestrategyofbusinessincubationatparentcompanylevelUpDownside532assetinjectiontoYuexiuTransportfollowedbythespin-offofmatureprojectsCurrentPriceHK457throughthelistingofREITswillenableYuexiuTransporttofullycapturethemostprofitablestageoftollroadoperationsWeliketheCompanysexcellentChinaTollRoadtrackrecordofdividendpaymentcontinuousdistributionsincelistingin1997WayneFUNGCFAandgoodexecutiononassettransactionAsapureexpresswayoperatorin85239000826GuangdongandHubeiYuexiuTransportissettobenefitfromthestrongwaynefungcmbicomhkrecoveryoftrafficvolumeaftereconomyreopeningWeforecastcorenetprofitgrowthof5810in2023E24EInitiatewithBUYwithDCF-basedTPofKatherineNGHK70WACC5785237618725katherinengcmbicomhkIncubation-injectionstrategywiththesupportofYuexiuGroupUnderthisstrategyYuexiuGroupparentcompanyacquiresexpresswayStockDataassetsattheearlystageofdevelopmentAfterreachingcertainlevelofMktCapHKmn76464profitabilitytheseassetswillbeinjectedintoYuexiuTransportWeAvg3mthstoHKmn38understandthatthetransportassetsthatareattheincubationstageinthe52wHighLowHK542296TotalIssuedSharesmn16732parentcompanyamountedtoRMB7bnvsYuexiuTransportstotalassetsSourceFactSetofRMB36bnasatend-2022EYuexiuTransporthascompletedseveralassetacquisitionsinthepastHubeiprojectsin2019HenanprojectinShareholdingStructure2022andweexpectmoretocomethisyearGuangzhouYueXiuHoldings442SourceHKExEnhancecashrecyclingthroughthespin-offofinfrastructureREITsSharePerformanceYuexiuTransportcompletedthespin-offof70interestinHan-XiaoAbsoluteRelativeExpresswayprojectthroughthepublicofferingofinfrastructureREIT1-mth101-49HuaxiaYuexiuExpresswayREIT180202CHNRinDec2021The3-mth406-44spin-offnotonlyhelpedYuexiuTransportrecognizeRMB961mngainsbut6-mth34-58SourceFactSetalsospedupthecashrecyclingWeexpectmoreexpresswayprojectsreachingmaturestagetobespun-offgoingforwardwhichwillofferpotential12-mthPricePerformanceupsidetotheupcomingdividendpay-outEconomyreopeningtoboosttrafficvolumerecoveryGiventheU-turnofzero-COVIDpolicyweexpectameaningfulrecoveryofthetrafficvolumedrivenbythenormalizationofsocialactivitiesandtraveldemandWeexpectthetrafficvolumetoreturntothepre-pandemiclevelstartinginFebMargiventhatthefirstpeakofCOVIDinfectionalreadyappearedSourceFactSetDCF-basedTPofHK70OurTPimplies11x2023EPEwhichisinlinewiththehistoricalaverage105xWethinkourTPisnotexcessivegiventhestrongearningsrecoveryAnypotentialassetinjectionandspin-offwillofferupsidetoourTPEarningsSummaryYE31DecFY20AFY21AFY22EFY23EFY24ERevenueRMBmn29203702335140204305YoYgrowth342689520071NetprofitRMBmn1605146505729906810006EPSReportedRMB010088034054060YoYgrowth8598128609583103ConsensusEPSRMBnana041058062PEx484461167366PBx0706060605Yield13124497583ROE15134507781Netgearing1199593103111SourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk27Jan2023ContentsInvestmentSummary3Scaleupthroughassetinjectionfromparentcompany3Morepotentialprojectsspin-offtospeedupcashre-cycling3ExpansionofGNSRExpresswaytohelpextendconcessionright3Economyreopeningtodrivetrafficrecovery3Continuousdividenddistributionsincelistingin19973CompanyBackground4SolidpositionintheGreaterBayAreawhileexpandingfootprinttoCentralChina5GNSRExpresswayConcessionperiodtoextendthroughprojectexpansion11Corerevenuegeneratingassetwithhightrafficvolume11Concessionperiodwillbeextended11Incubation-injectionstrategytoacquirequalityassets14Hubeiassetsstarttobearfruit15HubeiProvinceahighgrowthregion15DaguangnanHancaiandHaneheadingintohighgrowthtrajectory15Potentialhigh-qualityassetinjections17LanweiExpresswayAhighIRRprojecttofullycontributein2023E17ShandongQinbinExpresswaythepotentialtargetofassetinjection18Economyreopeningisthekeyrecoverydriverfortollroad19ChinatollrevenuetendstogrowfasterthanGDP19Hubeitopotentiallygrowfasterthanthenationalaverage19ExpectpassengerturnovervolumetoseemeaningfulrecoveryinFebMar21FinancialAnalysisandEarningsForecast22Weforecastcorenetprofitgrowthof5810in2023E24E24Gearingratiotoincreasein2023E-24E24FinancialSummary27InitiatewithBUYwithTPofHK7029RiskFactors32Diversionoftrafficfromotherparalleltollroads32Gearingratioandfinanceexpensetorebound32UncertaintiesonGNSRexpansionproject32Appendix33ParentCompanyOverview33YuexiuTransportsManagementProfile34PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE227Jan2023InvestmentSummaryScaleupthroughassetinjectionfromparentcompanyLeveragingtheampleresourceintheparentcompanyYuexiuTransportdevelopsanincubation-injectionstrategytoexpandtheexpresswaybusinessUnderthisstrategytheparentcompanyacquiresexpresswayassetsattheearlystageofdevelopmentAfterreachingcertainlevelofprofitabilitytheassetswillbeinjectedintoYuexiuTransportSeveralhigh-qualityexpresswayswereinjectedintoYuexiuTransportincludingHancaiHaneandDaguangnanin2019whichboostedrevenuegrowthoverthepastthreeyearsInNov2022YuexiuTransportcompletedtheacquisitionofHenanLanweiExpresswaywithanestimatedIRRof95TheacquisitionhelpedincreaseYuexiuTransportstollmileageby12to556kmWeestimatetheprojectwillcontribute8ofrevenuein2023EandwillfurtherincreaseinthecomingyearsWeunderstandthatthetransportassetsthatareattheincubationstageintheparentcompanyamountedtoRMB7bnvsYuexiuTransportstotalassetsofRMB36bnasatend-2022EWeexpectmorepotentialacquisitionstodrivegrowththisyearMorepotentialprojectsspin-offtospeedupcashre-cyclingInDec2021YuexiuTransportcompletedthespin-offof70interestinHan-XiaoExpresswayprojectthroughthepublicofferingofinfrastructureREITHuaxiaYuexiuExpresswayREIT180202CHNRThespin-offnotonlyhelpedYuexiuTransportrecognizeRMB961mngainsbutalsospedupthecashrecyclingYuexiuTransporthasretained30shareholdinginordertomaintainastableincomestreamfromtheprojectaswellascollectingmanagementfeeWeexpectmorematureprojectstobespunoffforREITlistingtoacceleratetherecyclingofcashandenhancetheinvestmentreturnoftheprojectinthenearfutureExpansionofGNSRExpresswaytohelpextendconcessionrightGNSRExpresswayisthecoreoperatingassetofYuexiuTransportaccountingfor31ofconsolidatedrevenuein1H22WiththeincreasingtrafficvolumeinGuangzhouGNSRExpresswayisfacingtheproblemofsaturationHencetheGNSRExpresswayReconstructionandExpansionREProjectisinitiatedTheconstructionworkswillbegininJun2023andtheprojectisexpectedtocommenceoperationby2028ETheIRRoftheprojectisestimatedat72Theexpansionprojectwillhelp1extendtheconcessionperiodofGNSRExpresswayfromthepresent2032toupto2053and2boostthetollrevenueasthenumberoflanesexpandedfrom6atpresenttoarangeof10to12EconomyreopeningtodrivetrafficrecoveryTheCOVIDoutbreakandstrictzero-COVIDpolicyhadposedhugechallengestoChinatransportindustryandadverselyaffectedYuexiuTransportsrevenuein2020-2022WiththeU-turnofzero-COVIDpolicyweexpectameaningfulrecoveryofthetransportsectordrivenbythenormalizationofsocialactivitiesandtraveldemandWeexpectthetrafficflowtorapidlyrecoverandreturntothepre-pandemiclevelstartinginFebMargiventhatthefirstpeakofCOVIDinfectionalreadyappearedinJanContinuousdividenddistributionsincelistingin1997YuexiuTransporthasmaintainedanimpressiverecordofdividenddistributionsince1997regardlessofanychangeineconomiccycleIn2018-2021thedividendpayoutratiowasmaintainedat51-61Weforecastthedividendpayoutratiotomaintainat55overthecomingtwoyearsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE327Jan2023CompanyBackgroundYuexiuTransportInfrastructurefoundedin1996isaleadingtransportinfrastructureassetmanagementcompanyinChinaTheCompanyismainlyengagedintheinvestmentoperationandmanagementoftollexpresswaysandbridgesinGuangdongProvinceandotherhighgrowthprovincesinChinaYuexiuTransportisoneofthefourcoreindustriesofGuangzhouYueXiuHoldingstheCompanyscontrollingshareholderwhichisastate-ownedenterpriseunderthesupervisionoftheState-ownedAssetsSupervisionandAdministrationCommissionoftheGuangzhouMunicipalPeoplesGovernmentTheCompanyhasbeenlistedonHKEXsince1997InDec2021HuaxiaYuexiuExpresswayREIT180202CHwiththeunderlyingassetoftheHan-XiaoExpresswayprojectwasspunofffromYuexiuTransportandlistedonSSETheCompanyretains30shareholdingoftheREITunitsFigure1ShareholdingstructureofYuexiuTransportSourceCompanydataCMBIGMFigure2BusinessmilestoneofYuexiuTransportSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE427Jan2023SolidpositionintheGreaterBayAreawhileexpandingfootprinttoCentralChinaYuexiuTransportowns16operatingexpresswaysbridgeandportprojectsinsixprovincesandregionsAsofNov2022thetotaltollmileageofthesubsidiariesreached55623kmattributable47765kmandtheattributabletotalmileageoftheassociatesandjointventurewas888kmTheremainingconcessionperiodoftheprojectssubsidiariesaveragesat137yearsYuexiuTransportoperatessixtollprojectsinGuangdongProvincenamelyGNSRExpresswayGWSRExpresswayNorthernRingRoadHumenBridgeQinglianExpresswayandShantouBayBridgeInlightofthedevelopmentopportunitiesbroughtbythenationalstrategyofRiseofCentralChinaYuexiuTransporthasbeenactivelyexpandingintoCentralChinawithlargelaborpopulationssuchasHubeiHunanandHenanprovincethroughtheacquisitionofnumeroushighwayprojectssince2008HenceYuexiuTransporthassuccessfullyformedthestrategiclayoutofgainingafootholdintheGreaterBayAreaanddevelopinginCentralChinaThetollrevenuegeneratedfromthetollprojectsoutsideGuangdongprovincehasincreasedfrom49in2017to65ofthetotalconsolidatedtollrevenuein2021incltheattributablerevenuefromJVandassociatesandremainedstableat66in11M22Figure3GeographicalmapofYuexiuTransportstollprojectsSourceCompanydataCMBIGMNote1TheprojectinShandongreferstothepotentialacquisitionofQinbinExpresswayPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE527Jan2023Figure4SummaryofYuexiuTransportsoperatingtollprojectsSourceCompanydataCMBIGMNote1TheprofitsharingratioofHumenBridgewas18446from2010onwards2TheacquisitionofLanweiExpresswaycompletedinNov2022Itsrevenuerefersto7M223TheconcessionrightofGNSRExpresswayisexpectedtoextendfrom2032Etoupto2053EuponcompletionoftheREprojectFigure5Vehicletypebreakdownbytrafficvolume2021SourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE627Jan2023Figure6AveragedailytolltrafficvolumeoftollprojectsSourceCompanydataCMBIGMFigure7AveragedailytollrevenueoftollprojectsSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE727Jan2023Figure8YuexiuTransportandYueXiuGroupsmajoracquisitionprojectsSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE827Jan2023Figure9DetailsofYuexiuTransportstollprojectSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE927Jan2023Figure10DetailsofYuexiuTransportstollprojectContdSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1027Jan2023GNSRExpresswayConcessionperiodtoextendthroughprojectexpansionCorerevenuegeneratingassetwithhightrafficvolumeGNSRExpresswayisYuexiuTransportscorerevenue-generatingassetYuexiuTransportowns60ofinterestsinGNSRIn1H22theexpresswaygeneratedrevenueofRMB482mnwhichaccountedfor31oftotalconsolidatedtollrevenuetheCompanyslargestsourceoftollrevenueTheexpresswaysgrossmarginreached668in1H22whichwasthesecondlargestamongtheprojectsThetotaltolllengthofGNSRExpresswayamountsto425kmwithsixlanesTheconcessionrightofGNSRExpresswaywillexpireinJan2032GNSRExpresswayisakeytrafficarteryinthenorthernpartofGuangzhouconnecting13mainrouteswhichincludeGuangqingExpresswayAirportExpresswayNationalHighway105etcMeanwhileitisacrucialsectionofexpresswaynetworkoftheGreaterBayAreagiventhatitconnectsGuangzhouandShenzhentwocoretier-onecitiesConcessionperiodwillbeextendedWiththeincreasingtrafficvolumeinGuangzhoutheGNSRExpresswayisfacingtheproblemofsaturationHencetheGNSRExpresswayReconstructionandExpansionREProjectislaunchedtoimprovethetrafficconditionsandservicestandardsThetotalinvestmentamountoftheREProjectisestimatedtobeRMB17bn70ofwhichwillbefundedbyexternalbankfinancingand30bytheshareholdersofGNSRCompany60byYuexiuTransportYuexiuTransportisestimatedtocontributeRMB306bnduring2023-2028Efundedbyinternalresourcesegtheproceedsgeneratedfromthespin-offofREITandorexternalfinancingTheREprojectalsoinvolvesatotaloflandexpropriationcompensationfeeofRMB326bnRMB242bnforBaiyunDistrictRMB085bnforHuangpuDistrictTheIRRfortheequityinvestmentintheREProjectisestimatedtobe72ThemajorconstructionworksofREProjectwillstartinJun2023andtheoperationisexpectedtocommenceby2028EDuringthereconstructionperiodGNSRwilladopttrafficmaintenancemeasurestominimizetheimpactonthetrafficflowandtollrevenueTheexpansionprojectwasapprovedbyshareholderson10JanWeexpecttheREProjecttohelp1extendtheconcessionperiodofGNSRExpresswayfromthepresent2032toupto2053boostingthelong-termDCFvalueoftheasset2increasethetollrevenuegiventhatthenumberoflanesexpandedfrom6atpresenttoarangeof10to12uponcompletionPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1127Jan2023Figure11LocationofGNSRExpresswayinFigure12LocationofGNSRExpresswayintheGuangzhouGreaterBayAreaSourceCompanydataCMBIGMSourceCompanydataCMBIGMFigure13LocationofGNSRExpresswaysectioninFigure14LocationofGNSRExpresswaysectionBaiyundistrictGuangzhouinHuangpuDistrictGuangzhouSourceCompanydataCMBIGMSourceCompanydataCMBIGMFigure15GNSRExpresswaystollrevenueFigure16GNSRExpresswaysgrossmarginRMBmn901400307875758072736971120067207063100060105080004060030-1040020200-201000-302016201720182019202020212022E2023E2024E2016201720182019202020212022E2023E2024EGNSRExpresswaysgrossmarginGNSRExpresswayTollrevenueChangeYoY-RHSSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1227Jan2023Figure17GNSRExpresswaysaveragedailytollFigure18GNSRExpresswaysmonthlytollrevenuetrafficvolumetrendSourceCompanydataCMBIGMSourceCompanydataCMBIGMFigure19GuangzhoushighwaycargoturnoverFigure20GuangzhoushighwaypassengerturnovervolumevolumeSourceWindCMBIGMSourceWindCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1327Jan2023Incubation-injectionstrategytoacquirequalityassetsLeveragingtheabundantresourceoftheparentcompanyYuexiuTransportdevelopsanincubation-injectionstrategytostrengthenandexpanditsinfrastructurebusinessTheincubation-injectionstrategyinvolvesthreestagesofdevelopmentatdifferentplatformsnamely1incubationattheparentcompany2injectionYuexiuTransportand3exitspin-offfromYuexiuTransportTheproceduresareasfollows1IncubationstageTheparentcompanyacquireshigh-qualityassetsinadvanceandfine-tunetheassetstoahighergrowthtrajectorySuchassetsinclude1assetswithriskydefectsrequiringrepairandclearing2assetswithtemporarydifficultiesindisclosureand3assetsthatlackthecashgeneratingability2InjectionstageOncethelistingrequirementshavebeenmettheassetswithsolidcashflowandpromisinggrowthpotentialwillbeinjectedintotheYuexiuTransport3ExitstageThelistedcompanywillexittheassetswithstableincomebutcomparativelylowgrowthpotentialthroughthepublicofferingsofREITsMeanwhileYuexiuTransportwillcontinuetoactasthemanageroftheprojectsandcollectstablemanagementfeeincomeThisstrategyenablesYuexiuTransportto1shortenthepaybackperiodoftheprojects2increaseprofitabilityand3lowerasset-liabilityratioWebelievethatYuexiuTransportwillcontinuetoexpanditsbusinessandoptimizeitsassetstructurethroughtheincubation-injectionstrategyWeexpectmorematureprojectstobespunoffforREITlistingFigure21Incubation-injectionstrategyandtheinteractionbetweenthethreeplatformsSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1427Jan2023HubeiassetsstarttobearfruitThroughtheincubation-injectionstrategyYuexiuTransporthasacquirednumeroushigh-qualityprojectsincludingHaneExpresswayHancaiExpresswayandDaguangnanExpresswayin2019allofwhicharelocatedinHubeiprovinceHubeiProvinceahighgrowthregionGiventheuniquelocationThoroughfaretoNineProvinces九省通衢aswellasanadvancedintegratedtransportationandlogisticsnetworkHubeiandWuhanhaverecordedsubstantialgrowthintheireconomiesandtrafficnetworksTheregionsareexpectedtobecomeanationalcrucialindustrialbaseandtransportationhubUpontheacquisitionYuexiuTransporthasatotaloffivetollprojectslocatedinHubeiProvinceincludingHanxiaoExpresswaySuiyuenanExpresswayHancaiExpresswayHaneExpresswayandDaguangnanExpresswayallofwhicharethemainsectionsoftheexpresswaynetworkofHubeiProvinceDaguangnanHancaiandHaneheadingintohighgrowthtrajectoryInrecentyearsHubeiprojectsespeciallytheDaguangnanHancaiandHaneExpresswayhavebecomeYuexiuTransportsmajorrevenuegrowthdriversThetotaltollrevenuegeneratedfromHubeiprojectsamountedtoRMB700mn45oftotalconsolidatedtollrevenuein1H22InadditionweexpectthatfollowingtheopeningofShunfengEzhouAirportthefourthcargoairportintheworldandfirstcargoairportinAsiademandfortransportationinHubeiwillbedrivenupespeciallyChinareopensHencethereisanexpectedboostinthetrafficvolumeandtollrevenueofHubeiprojectsuponShunfengEzhouAirportsopeningespeciallytheDaguangnanHancaiandHaneExpresswayFigure22TollrevenueoftheacquiredHubeiprojectsFigure23GrossmarginoftheacquiredHubeiprojectsSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1527Jan2023Figure24AveragedailytolltrafficvolumeofFigure25AveragedailytollrevenueofacquiredHubeiacquiredHubeiprojectsprojectsSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesFigure26HubeishighwaycargoturnovervolumeFigure27HubeishighwaypassengerturnovervolumeSourceMinistryofTransportationWindCMBIGMSourceMinistryofTransportationWindCMBIGMFigure28LocationandopportunitiesofmajorHubeiprojectsSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1627Jan2023Potentialhigh-qualityassetinjectionsLanweiExpresswayAhighIRRprojecttofullycontributein2023ELanweiExpresswayakeysectionofLannanExpresswayislocatedinthecoredevelopmentregionoftheZhongyuancityclusterinHenanProvinceItconnectsRilanExpresswayZhengminExpresswayDagaungExpresswayShangdengExpresswayandWeixuExpresswayoneofYuexiuTransportsexistingtollprojectsLanweiExpresswayisafour-lanematureexpresswaywithatotallengthof6103kmwhichhasbeeninoperationfor17yearssince2005ThankstothesuperiorgeographicallocationwebelieveLanweiExpresswaywillcontinuetotakeadvantageoftheregionaldevelopmentstrategicplansforinstancetheRiseofCentralChinaandtheconstructionsoftheZhongyuancityclusterandZhengzhouMetropolitanAreaInNov2022YuexiuTransportpassedtheacquisitionproposalofLanweiExpresswayThetotalacquisitioncostamountstoRMB1098mn40ofwhichwillbefinancedbyinternalresourcesandthebalancewillbefinancedbybankloanTheIRRoftheprojectisestimatedat95accordingtoYuexiuTransportTheconcessionrightofLanweiExpresswaywillendinJul2034witharemainingperiodof12yearsUponcompletionoftheacquisitionthetollmileageofYuexiuTransportscontrolledexpresswayswillincreaseby123to556kmwhichcanpartiallyoffsettheimpactbroughtbythespin-offofHanxiaoExpresswayWeforecastLanweiExpresswillcontributerevenueof8in2023EFigure29LocationofLanweiExpresswaySourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1727Jan2023ShandongQinbinExpresswaythepotentialtargetofassetinjectionTheChengkou-ZhanhuasectionofQinbinExpresswayisacrucialcomponentofBeijing-HarbinExpresswayaswellasoneofthefivehorizontallanesunderShandongprovinceshighwayplanninglayoutofNineverticalfivehorizontaloneringandsevenlinks9517NetworkTheexpresswayisthekeylinkagebetweentheShandongandHebeisectionofQinbingExpresswayTheprojecthasatotallengthof953kmAssumingacompletionoftheacquisitionthetollmileageofYuexiuTransportscontrolledexpresswaysisexpectedtoincreaseby2to56576kmThewholeprojectincludingbothphase1and2hasbeenopenedtotrafficsinceJan2022Figure30LocationofQinbinExpresswaySourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1827Jan2023EconomyreopeningisthekeyrecoverydriverfortollroadChinatollrevenuetendstogrowfasterthanGDPDuetothetightenedpoliciesinliquiditypropertyandCOVIDcontrolChinaeconomicgrowthhasexperiencedaslowdownsince2H21Lookingaheadwiththesurprisingendofzero-COVIDpolicyweexpectChinaeconomicgrowthtoacceleratein2023-2024ECMBImacroteamexpectsChinaGDPgrowthtospeedupfrom27in2022to5147in2023E2024EExpresswaytransportationdemandhasastrongpositivecorrelationwithGDPcorrelationbetweenexpresswaytollrevenuegrowthandGDPgrowth088ThegrowthrateofexpresswaytollrevenuehasbeengenerallyhigherthanthatofGDPovertheyearsexceptin2020distortedbytheCOVID-relatedlockdownandtemporarytollfeeswaivepolicyIn2021Chinashighwaytollrevenuerebounded37YoYtoRMB623bnupontheeliminationofthetemporarytollfeeswaivepolicywhileChinaGDPgrew84WeexpecttheexpresswaytollrevenuetodeliverhighergrowththanChinaGDPovercomingtwoyearsHubeitopotentiallygrowfasterthanthenationalaverageGuangdongandHubeiarethetwomajorprovincesthatYuexiuTransportsassetsarelocatedinInparticularweexpectHubeitocontinuetooutperformthenationalaverageintheupcomingeconomicrecoveryleadingtoaquickupturnintransportationvolumeFigure31SummaryofChinanationalandprovincialGDPSourceNBSWindCMBIGMNoteGDPchangereferstorealGDPgrowthFigure32ChinaquarterlyrealGDPandYoYgrowthFigure33ChinarealGDPgrowthandtollrevenuerecoveryaheadwitheconomyreopeninggrowthtollrevenuetendstogrowfasterthanGDPSourceNBSWindCMBIGMSourceNBSMinistryofTransportWindCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1927Jan2023Figure34ChinahighwaytollrevenueFigure35ChinaprovincialGDPgrowthSourceMinistryofTransportWindCMBIGMSourceNBSMinistryofTransportWindCMBIGMFigure36ChinapassengercarownershipvolumeFigure37ChinadomesticcarownershipbyregionSourceMinistryofPublicSecurityWindCMBIGMSourceMinistryofPublicSecurityWindCMBIGMFigure38ChinatruckownershipvolumeFigure39ChinaGDPvalueperunitofoperatingHDT35000RMBmn18300001616142500014131313131213132000012121212121212LDT1211111111101015000MDT10HDT8100008500060GDPRMBmnoperatingHDTSourceWindCMBIGMSourceWindCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE20