Shenzhen Expressway’s Q3 Results Meet Expectations

Shenzhen Expressway’s Q3 net profits attributed to owners of the group hit Rmb332 million, a year-on-year increase of 5.7%, which is in line with estimates.

From the period January to September 2016, the Group recorded net profits of Rmb947 million, a year-on-year increase of 11%. Toll charges were the main source of the Group’s revenue. From January to September 2016, the Group recorded toll revenues of RMB2.744 billion, a YOY increase of 25.4%.

Following the February 2016 implementation of the ‘Three Projects’ toll adjustment proposals traffic volume along toll-free road sections had increased, thus driving the growth of traffic volume on the connected Jihe Expressway and Shuiguan Expressway. The first three quarters’ outstanding results have laid a solid foundation for Shenzhen Expressway Company to meet its full-year targets.

The solid Q3 net profit growth was attributed to China’s economic growth. The country’s economy expanded at a steady 6.7% in the quarter and looks set to meet Beijing’s full-year target.

The National Bureau of Statistics announced last week that China’s Consumer Price Index, a general gauge of inflation, rose 2.1% last month YoY, compared with a 1.9% gain in September.

The Producer Price Index, a factory-gate measure of inflation, rose 1.2% from a year ago, turning toward an inflationary trend since September. Ultimately economists saw that industrial demand was rising while import commodity prices were also rebounding, resulting in a steady increase in economic vitality.

According to the Ministry of Communications, freight volumes on China’s roads rose 4.9% during the period January to September 2016, with express delivery volume achieving a YoY increase of more than 50%.

Analysts forecast that the positive trends in society-wide freight volume and sub-division circulation field data largely reflect the China’s economy entering a more stable phase. If this situation remains until the end of the year, expressway traffic flow will maintain a course for growth.

The data show that during the National Day ‘Golden Week’ holiday this year, traffic volume on mainland China’s toll roads reached more than 280 million units, a YOY increase of 7.8%.

The Beijing-Tianjin-Hebei region, Yangtze River Delta, Pearl River Delta and Chengdu-Chongqing region routes all recorded significant traffic congestion during this period. The number of people who choose to drive on holiday tours has also been increasing over the past several years, which will, in turn, boost development of the expressway industry and directly benefit Shenzhen Expressway Company Limited (“Shenzhen Expressway” or the “Company”; Stock Code:0548.HK).

The Restricted A Share Incentive Scheme (the “Scheme”) was passed by the Company Board at the end of September 2016, and was submitted at a general meeting to reconsider several of the Scheme’s resolutions on 23rd November 2016.

The Company is confident that implementation of the Scheme will further establish and improve the Company’s long-term corporate incentive systems, attract and retain top talent, and actively motivate the Company’s senior management and key technicians.

All of these factors will effectively tie together the interests of shareholders, the Company and its management, enabling all relevant parties to become more aware of the Company’s long-term developmental potential, and more effectively realise the Company’s development strategies.

The Incentive Scheme has adopted restricted shares as a motivational tool. The source of the underlying granted shares will be ordinary A shares issued to participants by the Company. –