The Beijing-Shanghai High Speed Rail announced its 2023 performance pre-profit. It is estimated that net profit returned to mother in 2023 will be 108-12.2 billion yuan, and net profit after deducting non-return to mother will be 108-12.2 billion yuan, reversing losses over the previous year.

The domestic passenger transport market recovered significantly, and the company's 23-year performance turned a year-on-year loss into a profit. Along with the continuous recovery of domestic passenger traffic, the company's profit level improved markedly. Net profit from 23Q1-Q3 was 2.23 billion yuan, 2.91 billion yuan, and 3.78 billion yuan respectively, recovering to 94%, 98%, and 104.7% in 2019, respectively. The company's net profit for 2023 is expected to be 108-12.2 billion yuan, with a sharp year-on-year return to 90.5%-93.8% in 2019. Of these, 23Q4 is expected to achieve net profit of 18.9-2.29 billion yuan, reverting to 78%-94.6% in the same period in 2019. Travel declined in the fourth quarter, and the number of passengers sent by national railways in 23Q4 was about 750 million, down 35% from 23Q3 to 87.6% in the same period in 2019, while maintenance costs were concentrated in the fourth quarter During the settlement period, there was a month-on-month decline in performance.

The national railway operation map was adjusted for the first quarter to focus on passenger traffic performance after the Spring Festival travel season began. In 2023, the National Railway completed the number of passengers sent 3.68 billion, an increase of 128.8% over the previous year, an increase of 2.8% over 2019. The number of passengers sent on peak days exceeded 20 million, and the average number of passengers sent per day exceeded 10 million. The number of passengers sent throughout the year and on peak days reached a record high. Starting January 10, 2024, railways across the country will implement a new train operation map. After the map is adjusted, 11,149 passenger trains will be arranged every day, an increase of 233 trains compared to the previous map, and the train operation structure will continue to be optimized. Follow the railway passenger flow performance at the start of the Spring Festival travel season. According to China Railway, the 2024 Spring Festival travel season will last for a total of 40 days (from January 26 to March 5). National railways are expected to send 480 million passengers, an increase of 37.9% over the 2023 Spring Festival travel season (January 7 to February 15), an increase of 16.2% over the 2019 Spring Festival travel season (January 21 to March 1), and an average of 12 million passengers per day. National railways are expected to send passengers on the first day of the Spring Festival travel season on January 26 10.6 million people.

Investment advice. The railway passenger transport market recovered rapidly throughout 2023, and the number of passengers sent reached a record high, but there is still a gap in railway transportation distance compared to the same period in 2019. Looking ahead to 2024, we are concerned that passenger traffic will continue to grow after the official launch of the Spring Festival travel season. In the short term, there is still room for improvement in the volume and price of the main line of the Beijing-Shanghai High Speed Rail. The Changjinghuang High Speed Rail has been fully opened and operated. The Hu-Su-Shanghai Railway and the Beijing-Xiongshang High Speed Rail are scheduled to open and operate by the end of '24. After opening, the railway networking effect around Anhui is prominent, and the Beijing-Fuzhou Anhui is expected to continue to reduce losses. According to the company's pre-profit announcement, the profit forecast was slightly raised, and net profit returned to mother for 23-25 is estimated to be 115.6/136.4/15.01 billion yuan, respectively, maintaining the “Highly Recommended” rating.

Risk warning: competition risks brought about by other means of transportation, risks of untimely liquidation of China Railway and changes in liquidation policies, risks of Beijing-fu-Anhui transportation capacity growth falling short of expectations, and risks of major high-speed rail safety accidents.