Slightly raise the target price to maintain the "increase". In order to fully consider the risk of high-speed rail diversion, the profit forecast for 2014-16 was lowered to 0.51,0.49 and 0.52 yuan, by 13.6%, 12.5% and 14.8%. Jiangxi Changyun is the only A-share long-distance passenger transport company with provincial network. Network effect and line monopoly determine the competition barrier. Operating net cash continues to be much higher than net profit, and the long-term value of the company depends on the recovery and use of capital. Refer to the industry average PE 31 times, slightly raise the target price to 15.7 yuan. The commissioning of the new station and the revitalization of the assets of the old station will help to further improve cash flow. The comprehensive passenger transport hubs of Nanchang West, Nanchang and Fuzhou are expected to be put into production in 2015. After the new passenger transport hub is put into production, the existing Fuzhou long-distance station, Xufang and Qingshan passenger station in Nanchang area can be gradually revitalized in the next three years. If the land is collected and stored or other forms of commercial development are adopted, it will contribute to the growth of the company's profits. China Daily holds more than 500 million yuan in cash and has an average annual operating net cash flow of more than 350 million yuan in the past three years.
Second-quarter results have bottomed out. Pre-tax profits fell by 26.914 million (- 19.7 per cent) in the first half of 2013 compared with the same period last year, due to a profit or loss of 11.028 million yuan on asset disposal in the first half of 2013, and a delay in fuel subsidies for public transportation in the first half of 2014 (9.588 million for the same period in 2013). First-half results fell 4.6 per cent year-on-year. We judge that fuel subsidies will be accounted for in the second half of the year.
The diversion of Nanchang-Changsha section of Hangzhou-Changsha long high-speed railway remains to be observed. The Nanchang-Changsha section of the Hangnan long high-speed railway was opened in September 2014, affecting the company's Nanchang, Xinyu and Pingxiang passenger transport companies. We estimate that the proportion of affected lines in the company's lines is 1.8%. Assuming that the passenger volume of the shunt lines decreases by 50%, the impact on passenger revenue in 2014 will be about 0.3% from the date of opening.
Risk tips: decline in passenger flow and higher-than-expected diversion of high-speed rail, losses at new stations, safety risks, and the risk of integration of the company's acquired assets.
