3Q23 performance is in line with our expectations
The company announced 1-3Q23 results: revenue of 143.04 billion yuan, an increase of 5.5% over the same period last year; net profit of 6.15 billion yuan, an increase of 2.1% over the same period last year, which is in line with our expectations. In a single quarter, 3Q23 revenue was 55.73 billion yuan, an increase of 2.7% over the same period last year, and its net profit was 2.69 billion yuan, down 7.1% from the same period last year.
Stable delivery of EMU and downward demand for urban rail. 1-3Q23 railway equipment income 52.5 billion yuan, year-on-year + 12.4%, mainly due to the increase in EMU and locomotive income; of which EMU income is 21.66 billion yuan, + 43.4% year-on-year, we think it is mainly due to the first three quarters EMU bidding and company delivery sound, locomotive revenue 16.46 billion yuan, year-on-year + 7.5%, passenger car income 2.77 billion yuan, year-on-year + 40.4%, truck 11.62 billion yuan, year-on-year-18.9%. 1-3Q23 urban rail and urban infrastructure income of 30.12 billion yuan,-12.9% compared with the same period last year, mainly due to the reduction in the delivery of urban rail subway vehicles. The income of 1-3Q23 new industry is 55.92 billion yuan, + 14.8% compared with the same period last year, which is mainly due to the increase in income from energy storage equipment and general parts.
Gross profit margin rose year-on-year, operating cash outflow increased year-on-year. The comprehensive gross profit margin of 1-3Q23/3Q23 was 21.8%, 22.9%, an increase of 1.2ppt/1.7ppt over the same period last year, mainly due to the increase in the proportion of railway equipment income with higher gross profit margin. The net interest rate of 1-3Q23/3Q23 is 4.3%, 4.8%, down 0.1ppt/0.5ppt from the same period last year. 1-3Q23 operating cash flow net outflow of 3.99 billion yuan, year-on-year outflow of 13.85 billion yuan, of which 3Q23 net inflow of 10.79 billion yuan, less inflow of 1 billion yuan.
Trend of development
The railway passenger volume continues to improve, and the purchasing demand of EMU is up. According to the National Bureau of Statistics, the total number of railway passengers from January to September was 2.93 billion, an increase of 4.5 percent over the same period in 2019. The cumulative railway passenger volume in the first three quarters has exceeded the 2.69 billion passengers expected by the National Railway Group at the beginning of this year. Among them, the number of passengers reached a record high in July and August respectively. We believe that since the beginning of this year, the improvement trend of railway passenger volume has continued, looking ahead, the follow-up peak travel periods such as New Year's Day and the Spring Festival will come, which is expected to further increase the utilization rate of EMU, and then support the upward purchasing demand of EMU.
The downstream demand of the new industry remains prosperous. On the one hand, the company has laid out the whole industry chain business in the field of wind power, such as complete units and spare parts; according to the National Energy Administration, the installed capacity of wind power in China is about 400 million kilowatts, an increase of 15.1% over the same period last year, and downstream demand remains prosperous. On the other hand, the company also distributes new materials, new energy vehicle electric drive, ship electric drive, marine equipment and other relatively prosperous new business.
Profit forecast and valuation
Maintain an industry rating that outperforms. Taking into account the greater demand pressure on urban rail, the 2023 EPS 2024 forecast is reduced by 8% to 0.36 RMB 0.38. The company's A shares are currently traded on 15x/14x 23e/24e Pamp E, and H shares are traded on 9x/8x 23e/24e pram E. Taking into account the profit reduction, the price of 10% of the target price of 18x/17x 23e/24e H shares is reduced by 15% to 6.57 yuan / HK $4.44, and A shares correspond to EMagi H shares and 19% upside space of 19% respectively.
Risk
The bidding of the National Railway Group is not as expected, and the bidding of the wind power industry is not as expected.