UBS cuts Jiangsu Expressway stock rating to neutral, target to HK$9.80

On Thursday, UBS analyst Robin Xu adjusted the outlook for Jiangsu Expressway Co Ltd (177:HK), downgrading the stock from Buy to Neutral and decreasing the price target to HK$9.80, a drop from the previous HK$11.00. The revision comes as the company, which has recently refocused on its toll road business, is experiencing a reduction in dividend yield and faces a cautious traffic forecast coupled with substantial capital expenditure plans.

The analyst noted that Jiangsu Expressway’s dividend yield has declined from an average of 6.9% in the first half of 2023 to an estimated 5.5% for 2025. This expected yield approaches the historical average of around 5.3% seen from 2010 to 2019. The firm’s significant capital expenditure plan is expected to limit the potential for dividend per share (DPS) growth between 2025 and 2028, with predictions that the payout will stabilize at approximately 50%.

The reduced dividend yield and the anticipation of a steady payout ratio are central to the revised rating. UBS’s analysis suggests that the potential for a re-rating of Jiangsu Expressway’s stock has diminished, leading to the downgrade to a Neutral stance.

The traffic outlook for Jiangsu Expressway remains a concern for UBS, which has adopted a cautious stance. This outlook, combined with the company’s capital expenditure plan, is likely to influence the stock’s performance and the company’s ability to increase its dividend payouts in the near future.

Investors and market watchers will be keeping a close eye on Jiangsu Expressway’s financial performance and traffic numbers as they unfold, to see how they align with UBS’s projections and the impact these factors may have on the company’s stock valuation going forward.

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