Core views
1) In Q2 2023, the company achieved revenue of 6.234 billion yuan, up 38.75% year on year, and 1.43% month on month; operating cost of 5.844 billion yuan, up 18.13% year on year, and 5.66% month on month; realized net profit of 272 million yuan, down 32.84% month on month. The cost increase is mainly due to the increase in the number of trains operated by the company organization.
2) The number of passengers on the company's intercity trains, direct trains and long-distance trains increased by 28.3%, 43.7% and 60.7%, respectively, in July, and recovered to 63.9%, 45.5% and 95.9% in 2019.
The company's direct passenger traffic statistics may have changed, or because the Guangzhou-Kowloon Express was changed from the Guangzhou-Shenzhen Intercity Intercity via the Guangzhou-Shenzhen-Hong Kong High Speed Rail, the section from Dongguan to Hong Kong West Kowloon was not counted.
3) From July 1 to August 22, the number of passengers sent by the Guangzhou Railway Group increased by 13.1% over the same period in 2019. From August 1 to August 23, Guangzhou Railway Group's average daily passenger traffic is expected to increase by 6.9% compared to July and 20.0% from August 2019.
3) Guangzhou Baiyun Station is expected to complete extensive decoration construction in early October, and completed and delivered by the end of the year. The renovation and expansion of Guangzhou East Railway Station is expected in 2023-2026, which may lead to a revaluation of the company's assets, and the logarithmic space for the company's train operation may increase significantly in the future. Furthermore, the 975,000-square-meter warehouse and storage yard owned by the company are also likely to be re-valued.
occurrences
On the evening of August 29, 2023, the company released the 2023 semi-annual report. The company achieved operating income of 12.381 billion yuan in the first half of 2023, an increase of 30.44% over the previous year; realized net profit of 677 million yuan and loss of 765 million yuan in the same period last year; net profit after deducting non-recurring profit and loss was 662 million yuan, and loss of 784 million yuan in the same period last year.
Brief review
Net profit for the second quarter was 272 million yuan, the number of trains operated increased, and operating costs increased. The company achieved operating income of 6.234 billion yuan in the second quarter of 2023, up 38.75% year on year and 1.43% month on month; operating costs 5.844 billion yuan, up 18.13% year on year and 5.66% month on month; realized net profit of 272 million yuan, turning loss into profit year on year, down 32.84% month on month. The increase in main business costs is mainly due to the increase in the number of trains organized and operated by the company and the increase in the workload of railway operation services provided to other railway companies.
The company's passenger traffic continued to recover in July, and the direct bus passenger volume statistics may have changed. In July 2023, the company's overall passenger traffic volume was 6.689 million, up 47.2% over the previous month, and recovered to 80.4% in 2019. Among them, passenger traffic on intercity trains, direct trains and long-distance trains increased by 28.3%, 43.7% and 60.7%, respectively, and recovered to 63.9%, 45.5% and 95.9% in 2019. The company's direct passenger traffic statistics may have changed, or because the Guangzhou-Kowloon Express was changed from the Guangzhou-Shenzhen Intercity Intercity via the Guangzhou-Shenzhen-Hong Kong High Speed Rail, the number of passengers on the Dongguan to Hong Kong West Kowloon section was not counted.
Since the summer travel season, the number of passengers of the Guangzhou Railway Group has increased by 13.1% compared to 2019. With the addition of the night high-speed railway during the railway summer travel period from July 1 to August 22, 2023, the total number of passengers sent by the Guangzhou Railway Group increased by 409.29 million compared to 2022, an increase of 65.8%, an increase of 11.925 million passengers over 2019, and recovered to 113.1% in 2019. August is generally the peak return passenger flow. From August 1 to August 23, Guangzhou Railway Group's average daily passenger traffic is expected to increase by 6.9% compared to July and 20.0% from August 2019. Since the summer travel season, the Guangzhou Railway Group has operated an average of 2,700 passenger trains per day, an increase of 8.8% over the same period in 2019. It has added 3264 trains (including 258 nighttime high-speed trains), and 4 more nighttime high-speed trains from the night of August 25 to the early morning of the 26th.
Guangzhou Baiyun Station is expected to be completed and delivered by the end of 2023, and the company's asset value is expected to be reassessed on August 15, 2023. Guangzhou Baiyun Station has fully entered the mechanical and electrical installation and decoration stage. It is expected that extensive decoration construction will be completed in early October, and completed and delivered by the end of the year. After completion, the project will gradually take on regular express buses at Guangzhou Railway Station and Guangzhou East Railway Station. This is a precondition for future updates and renovations at Guangzhou Railway Station and Guangzhou East Railway Station. The renovation and expansion of Guangzhou East Railway Station is expected in 2023-2026, which may lead to a revaluation of the company's assets, and the logarithmic space for the company's train operation may increase significantly in the future. Furthermore, the company owns a cargo yard and storage area of 975,000 square meters. It is expected that idle land resources will be effectively reused, and the land will be stored or additional profits will be contributed.
Investment advice
According to the company's report for the first half of 2023, we adjusted our profit forecast as follows: the company's revenue for 2023-2025 is estimated to be 25.601 billion yuan, 27.098 billion yuan, and 27.8878 billion yuan; net profit to parent is 1,157 billion yuan, 1,372 billion yuan, and 1,536 billion yuan; corresponding EPS is 0.16 yuan, 0.19, and 0.22 yuan respectively; the corresponding A-share PE is 19.53, 16.47 and 14.71 times; the corresponding A-share PB is 0.88, 0.86 and 0.86 billion yuan 0.83 times; the corresponding Hong Kong stock PE is 10.75, 9.07, and 8.10 times, and the corresponding A share PB is 0.48, 0.47, and 0.46 times. Referring to international peers and the company's historical valuation level, select 1.5 times the A-share PB, based on the company's net assets of 3.64 yuan per share in 2023, corresponding to the target price of A-shares of 5.47 yuan; select 1.0 times the Hong Kong stock PB, corresponding to the target price of HK$4.04 for Hong Kong stocks.
Risk warning
1) The risk of capacity investment falling short of expectations; 2) the risk of ticket price fluctuations; 3) the production capacity of newly built railways falling short of expectations; 4) the risk of competition from other modes of transportation; 5) Risk of adjustment of liquidation policies.