GTHT released a research report stating that the comprehensive revision of the "Toll Road Management Regulations" has been in the works for many years, with broad industry consensus on four key amendments. The firm anticipates that policy optimization may accelerate, highlighting that amendments to the Highway Law would be a significant signal, potentially improving the sector's long-term returns. For a long time, expressway companies have simultaneously faced the constraints of limited operating terms for their road assets and the need for business continuity, making reinvestment an inevitable choice. Industry-wide reinvestment pressure has led to a general decline in reinvestment returns. The firm believes policy optimization will systematically mitigate reinvestment risks, safeguard "reasonable returns" on reinvestment, reduce the risk of traffic diversion to surrounding networks when older roads become toll-free upon expiry, and enhance long-term investment value. GTHT's main views are as follows:
Expressway traffic demand is recovering, and the advantage of dividend certainty remains prominent. The expressway sector experienced a concentrated release of pent-up demand and the effects of upgrade/expansion projects in 2023, driving high traffic volume growth and significant profit increases. From the second half of 2024 to the first half of 2025, expressway traffic volumes remained under pressure, with truck traffic declining year-on-year, a noticeable divergence from the steady growth trend in overall highway freight volume. The firm speculates this was mainly due to factors such as diversion to national highways and differentiated tolling amid economic fluctuations. Based on observations, expressway traffic volume turned positive year-on-year in Q3 2025, and the improving trend continued into Q4 2025. The firm expects the diversion effects of the past year may have been fully realized, and future expressway traffic demand is expected to resume a steady growth trend. Meanwhile, expressway companies have generally capitalized on the continuous decline in the LPR to actively optimize their debt structures; it is anticipated that the reduction in financial expenses will continue to support profit growth for expressways. With stable dividend policies and relatively manageable future capital expenditure pressure from upgrades and expansions, expressways remain a preferred dividend play within the transportation sector.
The comprehensive revision of the "Toll Road Management Regulations,"酝酿多年, is expected to accelerate. The "Toll Road Management Regulations" are the most critical policy for the expressway industry, promulgated in 2004 and effective至今,延续了 the basic principles of "reasonable return" and "taxation for maintenance" established by the superior Highway Law, effectively supporting the rapid construction of China's road network over the past forty years. However, as road construction costs continue to rise while toll standards remain unchanged for the long term, the profitability of new and upgrade/expansion projects has declined, financing has become more difficult, debt risks have accumulated, and it has become increasingly challenging to secure the substantially growing maintenance and management funding required by local governments over the next decade. The Ministry of Transport released draft revisions of the regulations in 2013, 2015, and 2018. In recent years, the revision has been consistently included in the annual legislative work plan, and senior meetings have repeatedly mentioned accelerating policy optimization. The firm believes that as a batch of expressways approach the end of their toll collection periods in the coming year, optimization of toll road policies may accelerate.
There is broad industry consensus on the revisions to the toll road policy, with amendments to the Highway Law highlighted as a key signal. Referring to the three draft revisions and various local pilot policies, there is broad industry consensus on four amendments. 1) New projects: Extend the operating term. Based on the "reasonable return" principle, extend from 25 years to 30 years, with the provision that "projects with large investment scale and long payback period can have an operating term exceeding 30 years." 2) Upgrade/expansion projects: Permit term extensions. The firm推测 this will likely be assessed similarly to new projects. 3) Introduce new reduction/compensation mechanisms. After trials in multiple regions, related mechanisms are expected to be legislated and promoted. 4) Establish a maintenance charging system. Based on the "user-pays" principle, establish a "two-phase charging" system comprising operating period charges and maintenance period charges. Importantly, future amendments to the superior Highway Law regarding the shift from "tax" to "fee" for maintenance funding could be a significant signal for the revision of the regulations.
Risk提示: Risks related to policy revisions, economic fluctuation risks, and market style shifts.
Comments