Earnings forecasts and valuation
Given unrealized gains from the industrial fund, we raise our 2026 attributable net profit forecast by 2.7% to RMB2.14bn. Factoring in traffic diversion from expansion works, we cut our 2027/2028 attributable net profit forecasts by 4.9%/2.9% to RMB1.80bn/1.76bn. We maintain our DCF-based valuation and raise our A-share/H-share target prices to RMB20.3/HKD20.4 (previous: RMB18.9/ HKD17.8). We use a WACC of 4.4%/5.4% (previous: 4.8%/6.2%), with equity IRR of 6.9%/8.8% (previous: 7.5%/10.2%).
Risks: weaker travel demand, larger road network changes than we expect, higher capex than we expect, and tariff cuts.