Executive Summary

Sichuan Expressway Company Limited has published its 2025 Annual Report, marking a pivotal year as the final year of the “14th Five-Year Plan” and laying the foundation for the “15th Five-Year Plan”. Despite a complex macroeconomic and industry environment, the Group achieved high-quality development, met its strategic goals, and strengthened its core competitiveness. The report contains several key developments and decisions that are highly relevant for shareholders and could impact the share value.

Key Highlights and Financial Performance

• Profit Growth: Profit attributable to shareholders reached approximately RMB 1.515 billion, a year-on-year increase of 4.52%. Basic earnings per share were RMB 0.466 (down slightly from RMB 0.474 in 2024).
• Dividend Policy: The Board recommends a final cash dividend of RMB 0.297 per share (tax inclusive), totaling around RMB 908.24 million. This payout represents 65.38% of the distributable profit under PRC GAAP and 60.02% of profit attributable to owners of the Company. The payout ratio is notably above the 30% minimum stipulated in the Articles of Association, reflecting a strong commitment to shareholder returns. This dividend proposal is subject to approval at the 2025 AGM and is scheduled to be paid on or around July 13, 2026.
• Share Price Performance: The Company’s shares in both Shanghai and Hong Kong reached their highest levels in nearly a decade, surging over 20% and 60% respectively from the start to the end of the year, outperforming industry peers. Dividend yields for both A and H shares exceeded 5%.
• Capital Structure: The gearing ratio fell to 66.65%, marking the third consecutive year of improvement, as the Company achieved a new low in financing costs and continued to optimize its capital structure.
• Cash Flow and Financing: Net cash inflow from financing activities increased by RMB 106 million year-on-year, primarily due to higher inflows from new bank loans, perpetual equity instruments, and corporate bonds.

Strategic Initiatives and Expansion

• Industrial Foundation and Main Business Expansion: The Company is reinforcing its core road property business through investment, construction, and maintenance of high-quality roads. It is leveraging existing assets to boost profitability and is making progress on key projects like the Chengle and Chengya Expressway expansion projects.
• Green and Integrated Development: A strategic focus is being placed on transportation-energy integration, expanding comprehensive energy networks, LNG, and electric vehicle charging infrastructure, and promoting synergy between traditional and green energy.
• Scene-Driven Value Creation: Transformation of expressway service areas into commercial hubs is underway, with the “one area, one feature” initiative bringing in high-quality business formats and themed brands. The Company is developing a “service area +” model, integrating culture, tourism, and logistics to diversify revenue and maximize asset value.
• Capital Operations: The Company is actively pursuing diversified asset expansion and investment in synergistic new energy, digital economy, low-altitude economy, and AI projects. It maintains a top AAA credit rating and plans to continue leveraging its listed company status for further asset integration and financial optimization.
• Risk Management: The Company is strengthening compliance, safety, and internal controls, with a closed-loop management system for production safety and enhanced risk supervision mechanisms.

Corporate Governance and Shareholder Interests

• Dividend Policy Details: The Company commits to paying at least 30% of distributable profit as cash dividends annually (under the lower of PRC GAAP or HKFRS), with a potential for higher distributions if financial conditions permit.
• Governance Enhancements: In 2025, the Company updated and improved several governance documents, including its Articles of Association, procedures for meetings, and committee rules, to align with evolving legal and regulatory requirements.
• Investor Relations: Investor relations management is a strategic focus, with market value management now one of the Company’s five core strategies. The Company has enhanced transparency, communication channels, and responsiveness to investor inquiries, and held multiple investor events and roadshows.
• Compliance: The Company confirmed full compliance with relevant laws and regulations in Mainland China and Hong Kong, with no significant non-compliance events reported.

Risk Factors and Uncertainties

• Policy Risks: Changes in industry policies and regulations could affect toll operations and business growth. The Company maintains active government relations and strengthens its business to mitigate these risks.
• Market Risks: Economic fluctuations and changes in regional traffic patterns may impact toll revenues. The Company closely monitors the macro environment, adjusts strategies, and enhances road network research.
• Financial Risks: Potential risks include tax compliance, financing structure optimization, and exposure to new regulatory policies as more diverse funding sources are pursued.
• Investment Risks: The capital-intensive nature of expressway projects means long payback periods and high sensitivity to assumptions in feasibility studies. The Company uses external reports and regularly reviews investment strategies.
• Operational Risks: The report notes robust risk management and internal controls, with no significant ESG or operational risks materializing during the period.

Other Noteworthy Items for Investors

• Share Capital: No change in the Company’s registered or issued share capital during the year. There were no share buybacks, redemptions, or sales of listed securities.
• Tax Withholding on Dividends: Dividends paid to non-resident enterprise shareholders (including HKSCC Nominees Limited) will be subject to a 10% withholding tax, and Mainland China individual investors via the Southbound Trading Link will be subject to 20% individual income tax.
• ESG Focus: The Company reconstituted its Strategic Committee as the Strategy and Sustainable Development Committee, intensifying its focus on integrating ESG into its corporate strategy. The full ESG report is published concurrently with the annual report.
• Auditor’s Confirmation: The annual financial statements were audited by ShineWing Certified Public Accountants (PRC) and PricewaterhouseCoopers (International). No significant audit issues or material weaknesses were identified.
• No Charitable Donations: The Group did not make any charitable or social benefit donations during the reporting period.
• Director and Executive Interests: As of 31 December 2025, there were no reportable interests or short positions in shares or underlying shares held by Directors or senior executives.

Potential Price-Sensitive Developments

• High Dividend Payout Ratio: The proposed dividend payout far exceeds the regulatory minimum, signaling strong cash generation and management confidence, which may positively influence share price.
• Share Price Outperformance: Exceptional share price performance in both Shanghai and Hong Kong, reaching decade highs and leading the sector, may attract additional investor interest.
• Capital Structure Optimization: Ongoing reduction in gearing ratio and lower financing costs enhance financial stability and may be viewed positively by investors.
• Strategic Expansion into New Sectors: Investments in energy integration, digital economy, and AI projects position the Company for future growth and diversification, with potential for re-rating as a modern infrastructure and technology play.
• Governance and ESG Leadership: Continuous improvements in governance and ESG integration may support long-term shareholder value and broaden the appeal to institutional and ESG-focused investors.