The company issued an announcement to increase the holding of the controlling shareholder, demonstrating the Group's confidence in the company's development. On January 23, the company disclosed an increase in holdings. CRRC Group increased its A-share holdings by 15 million shares from November 17, 23 to January 23, 24, accounting for about 0.05% of the company's total share capital. As of the disclosure date of this announcement, CRRC Group has increased its A-share holdings by a total of 29.19 million shares, accounting for about 0.1% of the company's total issued share capital, demonstrating confidence in the company's excellent development.
The downturn cycle has maintained steady growth, and new businesses have become an important growth engine. As a leading rail transit equipment company, CRRC has achieved steady growth against the trend in the rail transit industry's downward cycle. The core is the continuous expansion of new businesses, compounded by a recovery in profitability, which provided important support for the company to get out of the haze during the downturn in the rail transit industry.
The quality of the company's statements is excellent, and abundant cash flow supports high dividends. For cyclical companies, cash flow is usually an important indicator of reporting quality, and changes in FCFF usually precede changes in net profit. CRRC's statements are of excellent quality, and excellent cash flow supports the company's high dividend policy. The company's dividend rate has been stable over the years. In the past five years, the dividend ratio has exceeded 30%, and the dividend rate has exceeded 3%.
Dividend assets with undervalued and high dividends are growing steadily through bulls and bears. Reviewing the past few economic cycles, excess returns from stabilizing dividend assets during periods of economic downturn are even more remarkable. The current valuation level of the company, whether viewed horizontally or vertically, is in a relatively low position. As an undervalued dividend asset with high dividends, the company has the potential to surpass the investment value of bulls and bears.
Profit forecasting and investment advice. We expect the company's net profit to be 129/141/15.7 billion yuan in 23-25. Referring to comparable company valuations and the company's historical valuation center, the company was given a 2024 PE valuation of 15x, corresponding to a reasonable value of 7.37 yuan/share for A shares; considering the AH share premium factor, a reasonable value of HK$5.41 per share for H shares was given, and a “buy” rating was given.
Risk warning. Market competition increases risks, investment in the rail transit industry falls short of expectations, risks of overseas operations, and risk of exchange rate fluctuations.