Incidents:
The company released its annual report for the year 23, and achieved full-year revenue of 234.262 billion yuan, a year-on-year increase of 5.08%, net profit of 11.712 billion yuan, an increase of 0.50% year-on-year, and net profit of 9.106 billion yuan after deducting net income of 9.106 billion yuan, an increase of 14.24% over the previous year. Net profit after deduction slightly exceeded expectations.
Key points of investment:
The performance of railway equipment is outstanding, and the growth rate of the EMU is impressive. 1) Revenue by sector: railway equipment of 98.191 billion yuan, yoy +18.05% (of which, EMU 41.89%, locomotive 27.985 billion, yoy +1.59%, bus 9.699 billion, yoy +55.68%, truck 18.68%, truck 18.688 billion, yoy -7.67%), railway equipment maintenance revenue 33.371 billion yuan, yoy +7.62%, accounting for 33.99% of railway equipment revenue; urban rail 50,334 billion, yoy -9.68% (of which, vehicles Revenue of 40.237 billion, yoy -15.84%); new industries of 80.624 billion, yoy +4.56% (of which, wind power: 30.998 billion, yoy +0.50%); modern services: 5.112 billion yuan, yoy -26.12%; 2) Subregional revenue: domestic market: 206.529 billion yuan, yoy +4.01%, overseas 27.733 billion, yoy +13.75%.
Gross profit margin and net net profit margin have been rising steadily. 1) Gross profit margin: 23-year overall gross profit margin 22.27%, +1.05pct. By sector: Railway equipment 25.27%, +0.77pct, urban rail 21.29%, +0.56pct, new industry 19.14%, +1.51pct, modern services 23.53%, -2.20pct; 2) Net profit margin: 23-year net interest rate 6.22%, -0.22pct, net interest rate after deduction of 3.89%, +0.31pct; sales/management/R&D/finance expense rates were 3.92%/5.96%/6.13%/-0.09%, respectively, +0.46/0.05/+ 0.24/+0.06pct
There are plenty of new signatures and on-hand orders. In 2023, the company signed new orders of about 298.6 billion yuan, yoy +6.99%, of which the international business signed new orders of about 58.4 billion yuan, yoy 14.73%; orders in hand at the end of the period were about 2703 billion yuan, yoy +8.08%, of which the international business had active orders of about 112.7 billion yuan, yoy +13.95%.
Driven by demand and policy guidance, the upward trend in the railway equipment sector is expected to continue. 1) New demand: Railway construction accelerated in the last two years of the “14th Five-Year Plan”, and vehicles will need to be encrypted; 2) Renewal requirements: Advanced EMU repairs are expected to peak, with tenders in the first half of '24 already exceeding 23; 3) Policy guidance: The central government is promoting a new round of large-scale equipment upgrades and trade-in of consumer goods. The National Railway Administration said it will strive to basically eliminate old internal combustion locomotives by 2027.
The 24-25 profit forecast was lowered, and the 26-year profit forecast was added, and the “buy” rating was maintained. Considering that urban rail investment has slowed down due to high pressure on local debt, we lowered our 24-25 profit forecast and added a 26-year profit forecast. The net profit for 24-26 is expected to be 133.01 billion, 146.91, and 16.292 billion yuan, respectively (the original 24-25 profit forecasts were 147.83 billion yuan and 16.705 billion yuan). Currently, the stock price is 15, 13, and 12X for 24-26 PE, respectively. Compared to the comparable company in the same industry, the valuation of Times Electric (24-year 20X) is still low, so it maintains a “buy” rating.
Risk warning: the risk of macroeconomic fluctuations, the risk of uncertainty in railway fixed asset investment, etc.