--- title: "Guotai Junan: The highway industry has high dividend payouts and stable cash flow; policy optimization may accelerate" type: "News" locale: "en" url: "https://longbridge.com/en/news/225464344.md" description: "Guotai Junan released a research report stating that the cash flow in the highway industry is stable and the high dividend policy will continue. It is expected that highway companies with excellent reinvestment management will still be the preferred choice for dividends. The optimization of toll road policies will accelerate, helping reinvestment returns to return to a reasonable level. Highway companies maintain high dividends in the long term, and the dividend yield is influenced by the dividend rate and PE valuation. In 2023, both highway freight volume and passenger transport volume saw significant growth. Although performance may be under pressure in the first half of 2024, the industry's demand remains resilient" datetime: "2025-01-19T13:51:03.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/225464344.md) - [en](https://longbridge.com/en/news/225464344.md) - [zh-HK](https://longbridge.com/zh-HK/news/225464344.md) --- # Guotai Junan: The highway industry has high dividend payouts and stable cash flow; policy optimization may accelerate According to the Zhitong Finance APP, Guotai Junan has released a research report stating that the cash flow of highways is stable and high dividends are sustained, making dividend returns certain and expected. The optimization of toll road policies may accelerate, which will help reinvestment returns return to a reasonable level. Highway companies generally maintain a long-term dividend policy, and the high dividend commitments over the past few years have ensured the stability of the dividend policy. Considering the market value management requirements of central state-owned enterprises, it is expected that the high dividend policy will continue in the future, and highway companies with excellent reinvestment management remain the preferred choice for dividends. ## **The main points of Guotai Junan are as follows:** **Highways remain the preferred choice for dividends in the transportation industry** In the past three years, the A-share market has favored high dividends, and the highway sector has shown significant excess returns. The dividend yield depends on the dividend rate and PE valuation. Highways are heavy asset infrastructure assets with stable returns, relatively inelastic demand, and stable cash flow, with a continuous high dividend policy. The optimization of toll road policies may accelerate, which is conducive to reinvestment returns returning to a reasonable level. Highway companies with excellent reinvestment management remain the preferred choice for dividends, maintaining "overweight" ratings for China Merchants Highway (001965.SZ), Anhui Expressway (00995,600012.SH), Ninghu Highway (00177,600377.SH), and Shenzhen International (00152). It is noted that future market preferences will continue to dominate the space for excess dividend returns. **Highway traffic demand remains resilient, and the advantage of stable cash flow will be sustainable** In 2023, benefiting from the release of suppressed demand, highway freight volume increased by 8.7% year-on-year, and highway passenger transport volume increased by nearly 29% year-on-year, with A-share highway companies generally showing bright performance growth. In the first half of 2024, the high base combined with adverse impacts such as freezing rain and snow weather and an increase in free passage days, as well as the diversion and reconstruction of some sections, will generally put slight pressure on the year-on-year performance of A-share highway companies; the second half may see a year-on-year improvement trend affected by demand fluctuations, but still has relative resilience, with road assets with obvious location advantages showing better growth trends than the industry. Currently, the market's expectations for the highway industry trend are rational, and highway traffic demand will continue to be resilient. The effects of a series of national policies are expected to gradually manifest, and the stable cash flow advantage of highway companies will be sustainable. **The optimization of toll road policies may accelerate, which will help reinvestment returns return to a reasonable level** The standards for toll roads have basically remained at the level of the 1990s, while the construction or expansion costs of new or renovated units have risen significantly, leading to widespread reinvestment pressure in the highway industry. The current "Regulations on the Administration of Toll Roads" was promulgated in 2004 and is no longer suitable for ensuring the sustainable development of the industry. A comprehensive revision has been brewing for many years, and multiple revisions have become a consensus in the industry. It is expected that the optimization of toll road policies may accelerate. Referring to the 2018 revision draft, extending the operating period and delaying renovations and expansions will help reinvestment returns return to a reasonable level, systematically alleviating industry-wide reinvestment pressure. The revision draft proposes the principle of "reasonable return," and the operating period of operating highway projects is expected to be extended from the current 25 years to 30 years, and projects with large investment scales and long return periods may have operating periods exceeding 30 years. The operating period can be re-evaluated for renovations and expansions that increase the number of highway lanes **Investment Strategy: Reinvesting in Excellent Highway Companies Remains a Dividend Preference** It is recommended to preferentially select highway targets with excellent locations and reinvestment management, which will continue to benefit from market preferences. 1. Excellent Reinvestment Management: Nationally selected investment in high-quality road assets ensures stable long-term investment returns and performance growth that consistently outperforms the industry. 2. Location Advantage: Highways with excellent locations in 2024 show a growth trend in traffic demand that exceeds the industry average, and are expected to continue to ensure profit growth and stable cash flow in the future. Estimated Dividend Yields for 2024: China Merchants Highway 3.7%, Ninghu Expressway A 3.2%, Ninghu Expressway H 6.1%, Anhui Expressway A 3.5%, Anhui Expressway H 6.1%, Shen International 8.7%. 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