Core viewpoints
1) in 2023, Q2 company is expected to achieve a net profit of 195 million to 345 million yuan, a decrease of 51.85% and 14.81% compared with 405 million yuan in the first quarter, and a substantial turnround from a loss of 367 million in the second quarter of 2022 compared with the same period last year.
2) in 2023, the passenger volume of Q2 company increased by 18.73% compared with Q1, and the freight volume increased by 7.45% compared with Q1. We expect the company to open more trains in the second quarter, resulting in a significant increase in the cost side, while the occupancy performance may be lower than expected.
3) the passenger volume of Guangzhou Railway Group increased by 16.2% 10 days before the summer transportation compared with the same period in 2019, and we look forward to the performance during the peak summer transportation season.
4) attach importance to the value of high-speed rail network, and the Guangzhou-Shantou high-speed railway is expected to be opened by the end of September, which is expected to bring about an increase in the company's cross-line train fleet.
Event
On the evening of July 14, 2023, the company issued a semi-annual performance forecast for 2023. The company expects a first-half net profit of about 600 million yuan to 750 million yuan, compared with a loss of 765 million yuan in the same period last year. Net profit after deducting non-recurring profits and losses is about 590 million yuan to 740 million yuan.
Brief comment
The change in performance in the second quarter may be affected by the cost side, and the recovery of the occupancy rate may be lower than expected. The company is expected to achieve a net profit of 195 million 345 million yuan in the second quarter of 2023, a decrease of 51.85% and 14.81% compared with 405 million yuan in the first quarter. It is a substantial turnround from a loss of 367 million in the second quarter of 2022 compared with the same period last year. The overall passenger volume of the company increased by 18.73% in the second quarter compared with the first quarter, of which the passenger volume of intercity trains, through trains and long-distance trains increased by 32.08%, 31.78% and 10.44% respectively in the first quarter; the overall freight volume increased by 7.45% over the first quarter, and the freight volume increased by 6.04% compared with the first quarter. We expect the company to build more trains in the second quarter, resulting in a significant increase in the cost side, while the performance of the occupancy rate may be lower than expected, resulting in a decline in the final profit end compared with the first quarter.
Ten days before the summer transportation, the passenger volume of Guangzhou Railway Group increased by 16.2% compared with the same period in 2019, and we are looking forward to the performance in the summer peak season.
The railway summer passenger transport period in 2023 will run from July 1 to August 31, a total of 62 days. Guangzhou Railway Group expects to send an average of 1.694 million passengers a day, an increase of 47.7% over the same period last year, returning to 98.1% in 2019. Guangzhou Railway Group sent an average of 1.939 million passengers a day from July 1 to 10, an increase of 16.2% over the same period in 2019, of which more than 2.1 million passengers were sent for three consecutive days from July 8 to 10.
Attach importance to the value of high-speed rail network, Guangzhou-Shantou high-speed railway is expected to open by the end of September
The opening of high-speed rail lines with speeds above 300km per hour such as Guangzhou-Shantou high-speed railway and Guangzhan high-speed railway from 2023 to 2024 is expected to lead to the opening of the company's cross-line train group. The Guangzhou-Shantou high-speed railway is expected to open on September 30, 2023, and the joint test has been officially launched on July 10. It is expected that the Guangzhou-Huizhou section will run 100 pairs per day, and the Huizhou-Shanwei section 54 pairs per day. The Guangzhan high-speed railway is expected to open in 2024 and the number of passenger trains is expected to be 55-64 pairs per day in 2030. At the same time, the company has a cargo yard and yard area of 975000 square meters, idle land resources are expected to be reused effectively, land storage or contribute additional profits.
Investment suggestion
According to the forecast of the company's performance in the first half of 2023, we adjust our profit forecast as follows: the company's operating income from 2023 to 2025 is expected to be 25.75 billion yuan, 27.84 billion yuan and 28.875 billion yuan, and the return net profit is 1.156 billion yuan, 1.377 billion yuan and 1.540 billion yuan, the corresponding EPS is 0.16,0.19 and 0.22 yuan respectively, and the corresponding A-share PE is 21.04,17.64 and 15.77 times. The corresponding PB of A shares is 0.94,0.92,0.90 times. The corresponding PE of Hong Kong stock is 12.00,10.06 and 9.00 times, and the corresponding A share PB is 0.54,0.52,0.51 times. With reference to the international counterparts and the historical valuation level of the company, the A-share PB is 1.50 times, and the company's net assets per share in 2023 is 3.64 yuan, corresponding to the A-share target price of 5.47 yuan, and the Hong Kong stock PB 1.0 times, corresponding to the Hong Kong stock target price of HK $4.04.
Risk hint
1) the risk of transport capacity falling short of expectations; 2) the risk of ticket price fluctuation; 3) the climbing progress of new railway capacity is lower than expected; 4) the competition risk of other transport modes; 5) the risk of liquidation policy adjustment.