Event: The company released its 2023 annual report. The company achieved annual revenue of 26.2 billion yuan, an increase of 31.4% over the previous year; realized net profit of 1.06 billion yuan, turning a loss into a profit over the same period of the previous year (loss of 2 billion yuan); realized net profit deducted from non-mother of 9.3 billion yuan, turning a loss into a profit over the same period of the previous year (loss of 2 billion yuan). In the fourth quarter of 2023, the company achieved revenue of 7.02 billion yuan, up 49.2% year on year, up 3.2% month on month; realized net profit of 39 million yuan, turning a loss into profit from the same period last year (loss of 1 billion yuan), down 89% month on month; realized net loss after deduction of 65 million yuan, a sharp decrease from the same period last year (loss of 1 billion yuan), changing from profit to loss month-on-month.
Passenger traffic has recovered relatively slowly, and the opening of new routes has boosted the company's passenger revenue growth. The company sent about 59.32 million passengers in '23, up 124% year on year, and recovered to 70% of the same period in '19. Among them, intercity trains and other cars sent about 23.4 million and 35.1 million passengers respectively, up 149% and 106% year on year, respectively, to 58% and 81% in the same period in '19, and 800,000 passengers sent by express train (business suspended in 2022), and recovered to 43% in the same period in '19. Overall, with the continuous improvement of the external business environment, passenger traffic at various stations within the company's administration has clearly rebounded year over year, but the overall pace of recovery has been slow. The main reason is that other newly built high-speed rails/intercity railways in the Greater Bay Area have diverted the company's original business to a certain extent. The company has added some additional cross-line trains since 21, and the unit ticket price is relatively high. Due to the combined impact of volume and price, the company's passenger revenue in 23 was about 10.73 billion yuan, an increase of 61% over the same period in '22 and an increase of 34% over the same period in '19.
Road network clean-up and railway operation service businesses quickly resumed. In '23, the company achieved revenue of 4.27 billion yuan from the road network clearing business, an increase of 27% over the same period in '22, and an increase of 1.6% over the same period in '19; completed revenue of 4.19 billion yuan from railway operation services, up 15.7% from the same period in '22, and an increase of 11% over the same period in '19. The main reason is that demand for related services increased as demand in the railway passenger transport market continued to rise.
Shipment volume declined, and freight revenue increased. In 2023, the company shipped about 16.03 million tons of goods, down 3.3% year on year, mainly due to the decline in the country's export growth rate and the slowdown in fixed asset investment growth.
In 2023, the company achieved freight revenue of about 1.83 billion yuan, an increase of 13.1% over the previous year. The main reason was that the company increased the transportation of high-value-added goods through measures such as upgrading the product structure to improve service quality and improve transportation efficiency.
Production and operation resumed, and the gross margin of the main business was corrected. In 2023, the company's main business costs were about 232 billion yuan, an increase of 9.7% over the previous year. Among them, maintenance costs, material, water and electricity consumption, and passenger service fees increased 16.0%, 21.6%, and 9.4% year-on-year respectively. The number of trains organized by the company increased, and the workload of railway operation services provided to other railway companies increased. Based on the above, the gross margin of the company's main business in '23 was about 6.0%, which was positive compared to the same period in '22 (-12.8%), and a decrease of 1.4 pct compared to the same period in '19.
Investment proposal: The company will open new cross-line long-distance EMU trains, contributing to profit growth; Guangzhou Railway Station and Guangzhou East Railway Station will be transformed into high-speed rail stations in the future, and the company is expected to continue to open additional cross-line trains and continue to contribute to the increase in performance. Considering that the profit contribution of the new business was lower than expected, we lowered the 24-25 net profit forecast of 34%/28% to 1.12 billion yuan and 1.34 billion yuan, respectively, and added the 26-year net profit forecast of 1.51 billion yuan; considering the relatively low valuation level of the company's A shares and H shares, we maintained the “increase” ratings of the company's A shares and H shares.
Risk warning: The economic downturn has led to a decline in passenger freight demand; passenger traffic on self-operated railway lines has declined sharply; new cross-line trains have fallen short of expectations; the increase in road network clearing revenue and railway operation service revenue has fallen short of expectations.