Incidents:

On October 30, 2023, the Beijing-Shanghai High Speed Rail released its three-quarter report for 2023:

In terms of finance, in the first three quarters of 2023, the company achieved operating income of 30.88 billion yuan/yoy +102.8%, or 117% of the same period under a comparable scale in 2019; net profit of 8.91 billion yuan, net profit of 8.92 billion yuan after deducting non-return net profit of 8.92 billion yuan, compared to 150 million yuan and 150 million yuan respectively for the same period last year.

Among them, in 3Q2023, the company achieved operating income of 11.6 billion yuan/yoy +59%, net profit of 3.78 billion yuan, net profit of 3.78 billion yuan, net profit of 3.78 billion yuan after deducting non-return net profit of 3.78 billion yuan. The same period last year was 11.8 billion yuan and 1.18 billion yuan respectively.

Key points of investment:

The recovery of railway travel during the summer season accelerated. Driven by a month-on-month increase in revenue in the third quarter of 1.26 billion yuan during the summer travel season, the boom in railway travel increased again during the 3Q peak season. According to China Railway Group's announcement, the country's railway passenger traffic reached 1.16 billion in the third quarter, +18.5% over the same period in 2019, and recovered to 112.5% in the same period in 2019. Benefiting from a rapid recovery in demand combined with a 7-tier floating fare system, ticket price flexibility continued to show. With the adjusted caliber, 3Q2023 achieved operating income of 11.6 billion yuan, an increase of 1.26 billion yuan over the previous month.

Costs and expenses are basically stable, and Jingfu Anhui Company has significantly reduced losses

The overall performance of the company's costs and expenses is generally stable. The operating costs of 3Q2023 companies increased by 120 million yuan to 5.75 billion yuan, but management and financial expenses decreased by a total of 0.6 billion yuan from month to month.

Net profit of 3Q2023 increased by 870 million yuan to 3.78 billion yuan over the same period last month. Among them, benefiting from improved road networks and increased traffic density, Jingfu Anhui Company's losses in a single quarter continued to narrow. According to minority shareholders' profit and loss estimates, in 3Q2023, Jingfu Anhui lost about 120 million yuan, a year-on-month decrease of 200 million yuan.

Performance continues to recover after the epidemic, and growth can be expected to accelerate in the future

Along with the rapid recovery in demand, the company has emerged from the haze of the epidemic, and its performance continues to pick up. The fourth quarter train operation map for the national railway has been implemented since October 11, 2023. After the map adjustment, the number of passenger trains arranged by national railways was 1,075, an increase of 449 trains over the previous year, and the maximum capacity of the entire system was further increased. Meanwhile, trains on the Beijing-Shanghai High Speed Rail are still being encrypted. According to the Beijing Railway, the Beijing Administration added 10 new EMU pairs to the Beijing-Shanghai High Speed Rail in the fourth quarter.

As one of the core assets of China's high-speed rail, the company has long enjoyed location advantages and China's high-speed rail demand dividends, and its profitability is in a leading position in the world. With the optimization of the road network structure and the encryption of long-distance train operations, the company's asset utilization rate will continue to increase. As the economic level of the hinterland along the route continues to rise, combined with network effects, it will provide sufficient momentum for the long-term growth of the Beijing-Shanghai high-speed railway.

Profit forecast and investment rating: Based on the company's latest level of business recovery, we adjusted the profit forecast. The company's operating income from 2023 to 2025 is estimated to be 41,211 billion, 46,952 billion, and 50.415 billion yuan, respectively, and net profit of 11.854 billion yuan, 13.429 billion yuan, and 15.057 billion yuan, corresponding to PE 20.59 times, 18.17 times, and 16.21 times, respectively.

Be optimistic about the company's long-term growth space and maintain the “increase in holdings” rating.

Risk warning: (1) Macro side: large economic fluctuations, public health emergencies, major production safety accidents, etc.; (2) industry side: drastic policy changes, increased air and rail competition, etc.; (3) individual stock side: the pace of decline in production capacity falls short of expectations, etc.