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UBS upgraded Zhejiang Expressway Co Ltd (576:HK) from Sell to Neutral on Tuesday, raising its price target to HK$7.00 from HK$5.50 following improved trade conditions between the United States and China.
The investment bank cited lower reciprocal tariffs between the two countries as the primary reason for revising its toll revenue forecasts upward for the Chinese expressway operator. UBS increased its 2025-27 earnings estimates by 5-9% and dividend per share (DPS) forecasts by 3-9%.
UBS expects Zhejiang Expressway’s dividend to remain relatively stable despite the company’s significant capital expenditure plan scheduled for 2025-28. The current implied 2025 yield of 5.5% sits slightly below the 10-year average, while the firm’s DPS forecasts align with broader market consensus.
The impact of reciprocal tariffs on China’s expressway traffic has proven less severe than initially anticipated, according to UBS. This improved traffic outlook, combined with stable dividend projections, supported the rating upgrade.
Zhejiang Expressway operates toll roads and expressways in China’s eastern Zhejiang province, with its business directly affected by economic conditions and trade flows that influence commercial traffic volumes.
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