GTHT Securities has released a research report stating that, considering the impact of Jiangsu Bank's dividend cycle, JIANGSU EXPRESS (ASX: 00177) has confirmed profit growth for 2026.

Taking into account the gradual completion of the Yangtze River Coastal Expressway expansion and upgrade project, the firm has revised down its net profit forecasts for 2026-27 to RMB 4.9 billion and RMB 5.0 billion respectively, while adding a new 2028 forecast of RMB 5.2 billion.

The target price has been raised to HK$13.54, corresponding to a 2026 P/E ratio of 12 times, and the "Add" rating is maintained.

Key Points from GTHT Securities

The company's core operations improved in 2025, though profit was affected by the timing of investment dividend recognition.

Attributable net profit for 2025 was RMB 4.6 billion, a year-on-year decrease of 7%. Excluding the impact of the timing difference in Jiangsu Bank dividend recognition, estimated profit grew by approximately 2% year-on-year.

Core business operations showed improvement, with the operating gross margin increasing by 0.84 percentage points. This was driven by several factors: a 4% year-on-year decrease in traffic volume, with passenger vehicle traffic down 5% and commercial vehicle traffic flat; despite this, toll revenue on the Shanghai-Nanjing mainline saw a slight year-on-year increase due to benefits from traffic diversion to the Yangtze River Coastal route, demonstrating the resilience of demand supported by its strategic location. Quarterly toll revenue growth rates for Q1-Q4 were +2%, +1%, 0%, and -2% respectively. The closure of connecting road sections for construction starting in April (Zhenli) and June (Guangjing Xicheng) affected toll revenue growth, putting pressure on the second half's quarterly performance.

Financial expenses were reduced by 13% year-on-year. The company's comprehensive borrowing cost for 2025 was 2.26%, down 0.52 percentage points from the previous year.

A significant component of investment income is dividends from Jiangsu Bank. The bank initiated an interim dividend in 2024, leading to RMB 608 million recognized that year (for 2023 full year + 2024 H1). In 2025, RMB 168 million was recognized (for 2024 H2). It is expected that the full-year 2025 dividend will be recognized in 2026. This change in the dividend cycle impacted the 2025 results.

Q1 2026 Toll Revenue Growth Outpaced Industry, Jiangsu Bank Dividend to Boost Full-Year Profit

Attributable net profit for Q1 2026 was RMB 1.37 billion, a year-on-year increase of 13%.

While the company's traffic volume decreased by 4% year-on-year in Q1, toll revenue grew by 4%, outperforming the broader industry. This was primarily due to the Wufengshan Bridge benefiting from traffic diversion from parallel road assets. Toll revenue on the Shanghai-Nanjing mainline was flat year-on-year in Q1. The parallel Yangtze River Coastal Expressway expansion project shifted from half-width closure to segmented traffic control, leading to a reduction in its diversion effect. Full completion and opening of this route is expected in 2027.

The firm expects the company's toll revenue growth trend to continue throughout the year, with its locational advantage ensuring core business performance remains stronger than the industry average.

Jiangsu Bank's 2025 interim dividend of RMB 260 million was recognized in Q1. The expected recognition of incremental investment dividends is seen as a key factor ensuring the certainty of the company's profit growth.

Financial expenses in Q1 continued to decline, falling 11% year-on-year. The firm anticipates this downward trend may persist into Q2.

Dividend Maintained, Yield Returns to Attractive Range

The company increased its dividend per share to RMB 0.47 and RMB 0.49 in 2023 and 2024 respectively, following earnings growth. In 2025, it maintained the dividend per share at RMB 0.49 without a reduction, raising the payout ratio by 4 percentage points to 54%.

Expressways represent a typical domestic demand theme, and cash flow is expected to grow steadily, supporting a predictable dividend outlook. If the company maintains a cash dividend per share of RMB 0.49 for the next three years, the firm estimates a corresponding dividend yield of approximately 5.0%.

Risk Factors

Potential risks include economic fluctuations, industry policy changes, reinvestment risks, and shifts in market sentiment.