China General account reported that in the first three quarters of 2023, the company achieved revenue of 24.627 billion yuan, down 8.60 percent from the same period last year, and net profit of 2.566 billion yuan, down 1.35 percent from the same period last year. In the third quarter of 2023, the company reached 7.994 billion yuan, down 6.63% from the same period last year, and realized a net profit of 742 million yuan, an increase of 11.26% over the same period last year. The company's total new orders in the first three quarters of 2023 reached 50.883 billion yuan, an increase of 12.01% over the same period last year, laying a good foundation for subsequent performance release. We are optimistic about the company's leading market position and technical capability, with A shares maintaining a "overweight" rating at a price of 7 yuan, and a "overweight" rating for the first time at a target price of HK $3.50 based on a comparable company valuation.

Profits returned to growth in the third quarter, and overseas business was developing well. In the first three quarters of 2023, the company achieved revenue of 23.627 billion yuan, down 8.60% from the same period last year, of which railway market revenue was 11.771 billion yuan, down 1.67% from the same period last year; urban rail revenue was 5.758 billion yuan, down 13.22% from the same period last year; overseas business income was 1.067 billion yuan, up 12.87% from the same period last year; project total contracting income was 5.947 billion yuan, down 18.99% from the same period last year The net profit of returning to the mother was 2.566 billion yuan, down 1.35% from the same period last year. In the third quarter of 2023, the company achieved revenue of 7.994 billion yuan, down 6.63% from the same period last year; gross profit margin was 26.34%, an increase of 4.76 pcts over the same period last year; the increase in gross profit margin brought about the growth of the profit end, and the company achieved a net profit of 742 million yuan, an increase of 11.26% over the same period last year. The railway market business has maintained a relatively stable development, while the urban track business is under relative pressure. The company's overseas market business expansion is smooth, the development momentum is good.

The rapid growth of new orders in the first three quarters laid the foundation for the subsequent performance release. According to the company announcement, the total amount of new contracts signed by the company in the first three quarters of 2023 was 50.883 billion yuan, an increase of 12.01% over the same period last year. Of this total, new orders in the railway sector totaled 14.469 billion yuan, up 10.49 percent over the same period last year; newly signed contracts in the urban rail transit sector totaled 9.493 billion yuan, up 13.82 percent over the same period last year; and new orders for overseas business totaled 2.002 billion yuan, up 1014.95 percent over the same period last year. General contracting and other businesses increased by 24.919 billion yuan, an increase of 4.64%.

We believe that in the first three quarters of 2023, from the perspective of orders, the railway market and urban rail transit showed a trend of rapid development, the company's new orders performed well, and overseas markets expanded rapidly. the company has successfully achieved breakthroughs in overseas markets by virtue of its technical capabilities and project experience. The order growth has laid a good foundation for the subsequent release of the company's performance.

Risk factors: the risk that the national railway infrastructure investment is not as expected; the risk that the urban rail transit investment is not as expected; the risk that the industry competition intensifies leading to a decline in gross profit margin; the risk that the company's technological research and development progress is not as expected; the risk that international geopolitics and other factors hinder the development of overseas markets; the risk that the company's project construction schedule is not as expected; the risk of bad debts due to the company's accounts receivable, etc.

Earnings forecast, valuation and rating: we believe that the rail transit industry will maintain a good trend of development in the future:

In the short and medium term, driven by the policy, the domestic comprehensive transportation development index is clear, and China's rail transportation industry is expected to develop rapidly during the 14th five-year Plan period; in the medium and long term, the overseas market is expected to become a new growth engine of global rail transportation construction. We maintain the company's profit forecast, A shares, with reference to comparable company Traffic Control Technology, Zhonghe Technology, CRRC Corporation (in which Traffic Control Technology and CRRC Corporation adopt Wind consensus forecast, the rest adopt CITIC Research Department forecast), taking into account the company's urban rail transit business revenue pressure and other factors, give China General number 20 times PE in 2023, corresponding to the target price of 7 yuan, to maintain the "increase" rating. In terms of Hong Kong stocks, with reference to comparable companies time Electric and CRRC Corporation (both adopt the unanimous expectation of Wind), we will give China General name 9 times PE in 2023, corresponding to the target price of HK $3.50, and will be rated as "overweight" for the first time.