Key points of investment:
Incident: The Beijing-Shanghai High Speed Rail announced its 2023 annual results pre-profit. It is estimated that net profit attributable to shareholders of listed companies will be 10.8 billion yuan to 12.2 billion yuan in 2023, compared to -576 million yuan for the same period last year, turning a year-on-year loss into a profit. Among them, the company is expected to achieve net profit attributable to shareholders of listed companies of 1,886 billion yuan to 3.286 billion yuan in the fourth quarter, and the performance is in line with expectations.
In 2023, there was a high increase in railway passenger traffic, the encryption and quality of the road network improved, and transportation capacity continued to increase. According to China Railway Group data, in 2023, the National Railway completed the number of passengers sent 3.68 billion, an increase of 119.97% over 2022. The number of passengers sent on peak days exceeded 20 million, and the number of passengers sent during the whole year and peak days reached record highs. China Railway Group deepened supply-side reforms and increased investment. In 2023, China Railway completed fixed asset investment of 764.5 billion yuan, an increase of 7.5% over the previous year; put into operation 3,637 kilometers of new lines, including 2,776 kilometers of high-speed rail; 34 projects were completed and put into operation, and 102 passenger stations were put into operation with high quality. By the end of 2023, the operating mileage of national railways reached 159,000 kilometers, including 45,000 kilometers of high-speed rail. It is expected that in 2024, the company will continue to benefit from increased road network density and optimization of train operation plans.
The peak season for the Spring Festival travel season has arrived, and the company's first quarter results are expected to exceed expectations. According to China Railway Group's announcement, the Spring Festival travel season officially started on January 26, 2024. National railways are expected to send 480 million passengers for 40 days from January 26 to March 5, an average of 12 million passengers per day, an increase of 37.9% over the 2023 Spring Festival travel season. Railways across the country have implemented a train operation map for the Spring Festival travel season. It is estimated that about 12,700 passenger trains will be arranged every day before the holiday season and 12,800 passenger trains will be arranged every day after the holiday season. Passenger capacity will increase by 14.4% and 12.6% respectively over the 2019 Spring Festival travel season. Benefiting from the peak season of the Spring Festival travel season, high-speed rail passenger traffic increased, and the company's first quarter results are expected to exceed expectations.
The performance is in line with expectations and maintains a “buy” rating: In the short term, with the increase in railway passenger traffic, the company's main line and cross-line traffic is expected to increase steadily. In the medium to long term, benefiting from factors such as the improvement of the road grid, optimization of high-speed rail transportation organization and technology, and operation map adjustments, the core advantages of the Beijing-Shanghai high-speed railway line gradually became apparent. Maintaining profit forecasts for 23, 24, and 25, the company's 2023E-2025E net profit is estimated to be 120.32, 138.73, and 16.207 billion yuan, respectively, corresponding to PE of 20/18/15 times. Maintain the “buy” rating of the Beijing-Shanghai High Speed Rail.
Risk warning: China's macroeconomic decline has led to a decline in residents' travel demand; the country is implementing a price limit policy for high-speed rail fares.