The Guangzhou-Shenzhen Railway announced the results announcement for the third quarter of 2023. The first three quarters achieved cumulative operating income of 19.18 billion yuan, a year-on-year increase of 25.8%, and net profit of 1.02 billion yuan, a sharp reversal of losses over the previous year. Among them, Q3 achieved operating income of 6.8.0 billion yuan, an increase of 18.2% over the previous year, and net profit of 340 million yuan, an increase of 249.4% over the previous year.
Q3 Passenger and cargo delivery volumes continued to grow. In 23Q3, the company achieved operating income of 6.8.0 billion yuan, an increase of 9% over the previous month, and realized net profit of 340 million yuan, an increase of 25.4% over the previous month. Q3 is the peak season for traditional travel. In 23Q3, the number of railway passengers across the country increased by 12.5% compared to the same period in '19. Judging from the company's passenger and cargo delivery situation, the number of passengers sent by Guangzhou-Shenzhen Railway in July, August, and September was 6.689 million, 7.175 million, and 4.873 million respectively. Q3 passenger traffic increased 30.7% month-on-month, up 3.3% over the same period in '19. Among them, the number of passengers sent by intercity trains was 6.82 million, recovering to 78.9% in the same period in '19, and the degree of recovery increased by 22.6 pcts over Q2. The number of passengers sent by direct bus was 232,000, recovering to 65% of the same period in '19, and the degree of recovery from Q2 32.5pcts. The number of other (long-distance bus) passengers sent was 11.684 million, recovering to 56% in the same period in '19. In terms of freight, Q3's freight volume was 19.528 million tons, down 1.8% year on year and up 6.2% month on month.
Q3 Gross margin increased month-on-month, focusing on optimizing train operation maps for the fourth quarter. Boosted by the peak travel season, the company's gross margin and net profit margin rose month-on-month in the third quarter. Q3 gross margin was 7.6%, up 11.7pcts year on year, 1.3 pcts month on month, net profit margin was 5.0%, up 9.0 pcts year on year, and 0.6 pcts month on month.
Focus on the optimization of the train operation map for the fourth quarter. Starting from October 11, 2023, national railways will implement the fourth quarter train schedule. The number of passenger trains arranged by national railways will increase by 449 compared to the current map, and the number of freight trains will increase by 42 compared to the current map. The Guangzhou Railway Group has further optimized the passenger and freight train operation plan, including adjustments such as adding 24 EMU trains to the Guangzhou-Shantou high-speed railway, increasing the total number of trains operated by Guangzhou-Shenzhen intercity trains by 28, and increasing the number of train routes for the Guangzhou-Shenzhen-Hong Kong High Speed Rail.
Investment advice. We believe that the company: 1) benefits in the short term from domestic railway passenger demand and restoration of passenger flow through Hong Kong; 2) In the medium to long term, the company is rooted in the core area of Guangdong, Hong Kong and Macao, fully benefiting from the economic development of the Greater Bay Area. At the same time, with the continuous improvement of the provincial high-speed rail network plan, it is expected that it will be fully connected to high-speed rail operations in the future. Guangzhou Baiyun Station has fully entered the renovation stage, and the project progress has reached 70%-80%. It is expected to be completed and delivered by the end of the year. After completion, the company is expected to undertake more intercity high-speed train traffic, and the long-term expansion of Guangzhou Station and Guangzhou East Railway Station or passenger flow period. and there is room for growth in the operation of trains Larger. We have slightly adjusted the company's profit forecast. It is estimated that the company's net profit for 23-25 will be 12.0/13.9/1.48 billion yuan respectively, corresponding to a PE of 15.3x for '23, a PE of 13.2x, and a PB of 0.7x, maintaining the company's “increased holdings” investment rating.
Risk warning: Macroeconomic changes have led to insufficient demand for railway passenger transport, changes in railway freight policies, the impact of parallel line diversion, road network planning and core hub site renovation and expansion falling short of expectations.