The report in three quarters was better than expected, and the loss of 3Q narrowed
From July to September, Guangzhou-Shenzhen Railway achieved revenue of 5.75 billion yuan (an increase of 8.9 percent over the same period last year) and a net loss of 230 million yuan (compared with a net loss of 260 million yuan in the same period last year), which was better than we expected (a net loss of 370 million yuan). 3Q's revenue increased by 28% compared with 2Q, and its net loss narrowed by 38% compared with 2Q. Considering the 4Q land disposal income (9Compact 29 announcement), we adjust the net profit forecast of 2022E from-1.508 billion yuan to-1.359 billion yuan. Considering that weak travel demand is likely to continue, we lower our 2023E/2024E net profit forecast from + 483 million / + 643 million yuan to-947 million / + 452 million yuan. We are still based on the 0.620 times / 0.385 times 2022 forecast PB (1 standard deviation lower than the 2016-2021 average, reflecting the earnings trough discount), 2022E BPS is RMB3.65. We have raised the list price of the company's A shares by 0.4% to 2.26 yuan, but taking into account the change in the exchange rate of the Hong Kong dollar against the RMB from 0.88 to the latest 0.92, the target price of Hong Kong stocks has been lowered by 3.8% to HK $1.53, maintaining "overweight" / "buy".
Passenger transport: 3Q is better than 2Q, but slightly worse than the same period last year
The travel willingness of 3Q passengers is better than that of 2Q. The traffic volume of Guangzhou-Shenzhen intercity / long-distance train 3Q increased by 26% and 100% compared with 2Q, but decreased by 26.5% and 0.3% compared with the same period last year, and the traffic volume returned to 29% and 49% of the same period in 2019. Guangzhou-Kowloon through train 3Q is still out of service. The performance of long-distance trains is better than that between Guangzhou and Shenzhen, which may be related to the opening of Jiangxi-Shenzhen high-speed railway in December 2021, and the company has added cross-line EMU trains. Due to the company's new operational services for the Jiangxi-Shenzhen high-speed railway, 3Q's other transport revenue may continue the growth trend in the first half of the year.
Freight: less disturbed by external environment
3Q freight volume remains robust and is less disturbed by the external environment. The company's 3Q freight volume decreased by 0.3% year-on-year.
Among them, 3Q cargo delivery increased by 2.9% year-on-year, 3.6% lower than 2Q; shipping volume decreased by 10% over the same period last year, and increased by 7.9% compared with 2Q. Considering that 3Q freight volume is resilient and passenger volume is slightly poor, 3Q road network liquidation revenue may continue the downward trend in the first half of the year. 3Q costs rose 8.3 per cent year-on-year, while gross losses narrowed 2.4 per cent to-240 million yuan.
Part of the land to be disposed of for the construction of a railway freight yard
The company intends to deposit 11.3 hectares of land with government agencies, with an estimated value of 98 million yuan. The company expects the transaction to increase pre-tax profit by about 90 million yuan (9Lex29 announcement). The land is collected and stored by the government and then allocated to the Guangzhou Railway Group for the construction of a modern railway freight yard in Shenzhen and Hunan. The freight yard is one of the first 23 national logistics hubs and one of the 18 railway container centers planned by the National Railway Group. In the long run, after the completion of the project, it will help to attract the transfer of road freight volume to the railway, and help the company to expand the business of road-rail-sea multimodal transport and container transport.
Risk tips: 1) increased diversion of parallel railway lines; 2) poor willingness of passengers to travel.