| Valuation method | Value, HK$ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 28.70 | 1293 |
| Intrinsic value (DCF) | 2.21 | 7 |
| Graham-Dodd Method | 0.50 | -76 |
| Graham Formula | 3.00 | 46 |
Chengdu Expressway Co., Ltd. (1785.HK) is a leading infrastructure operator focused on the development, management, and operation of expressways in the rapidly growing Chengdu metropolitan area of Sichuan province, China. The company owns and operates a strategic network of five key expressways, including the vital Chengdu Airport Expressway, with a total network mileage of 202.37 kilometers. This positions it as a critical player in regional transportation infrastructure, facilitating economic activity and urbanization in Western China. Beyond its core toll road operations, Chengdu Expressway has diversified into the energy sector, engaging in the retail of refined oil, compressed natural gas stations, and electric vehicle charging facilities, capitalizing on China's energy transition. As a subsidiary of Chengdu Expressway Construction and Development Co., Ltd., the company benefits from strong local government ties and plays an indispensable role in the industrials sector by providing essential public infrastructure. Its business model generates stable, long-term cash flows from toll collection, supplemented by growth opportunities in adjacent energy services, making it a key infrastructure stock for investors seeking exposure to China's domestic development.
Chengdu Expressway presents a defensive investment profile characterized by stable, regulated cash flows from its essential infrastructure assets, which are underpinned by the economic growth and urbanization of the Chengdu region. Key attractions include a solid dividend yield (approximately 3.5% based on the last payout), a manageable debt load relative to its cash-generative operations, and a strategic diversification into energy retail which offers a growth avenue. However, significant risks are present. The company operates in a highly regulated environment where toll rates are subject to government approval, limiting pricing power. Its revenue is also inherently tied to regional economic health and traffic volumes, which could be impacted by economic downturns, competition from alternative routes, or long-term changes like remote work trends. Furthermore, as a Hong Kong-listed Chinese stock, it carries geopolitical and regulatory risks associated with foreign investment in China. The low beta (0.077) confirms its defensive nature but also suggests limited upside during broad market rallies.
Chengdu Expressway's competitive advantage is fundamentally geographical and regulatory. It holds a monopolistic or near-monopolistic position on the specific routes it operates within the Chengdu metropolitan area, a major economic hub in Western China. This creates high barriers to entry, as constructing competing expressways is immensely capital-intensive and requires government concessions. Its competitive positioning is strengthened by its status as a government-linked entity, which likely provides advantages in securing maintenance contracts and future development rights. The company's diversification into energy services at its expressway stations is a strategic move to create an ecosystem, capturing additional value from the traffic flow its roads generate. However, its competitive scope is limited by its regional focus; it does not compete on a national scale like some larger peers. Its primary competitive threats are not from direct toll road competitors on the same routes, but from macro factors: economic slowdowns reducing traffic, government infrastructure policy shifts, and the long-term development of alternative transportation networks (e.g., high-speed rail) that could divert traffic. Its financial performance is less about outperforming competitors and more about effectively managing its regulated asset base and leveraging its entrenched position for stable returns.