Incidents:
In 2023, the company achieved full-year revenue of 26.19 billion yuan, a year-on-year increase of 31.4%, and realized a net profit of 1.06 billion yuan to mother, which turned a year-on-year loss into profit (loss of 1.99 billion yuan in 2022). Among them, in the fourth quarter of 2023, the company achieved revenue of 7.02 billion yuan, a year-on-year increase of 49.2%, achieved net profit of 39 million yuan to mother, and a loss of 1.0 billion yuan for the same period in 2022. In 2023, the company paid a cash dividend of 0.07 yuan per share, with a dividend rate of about 47%.
The recovery in demand for railway passenger transportation led to a simultaneous recovery in the company's passenger transport and road network clearing service revenue in 2023, along with the elimination of external influencing factors in the previous period. Passenger traffic resumed at Shenzhen port and direct transit traffic, and passenger traffic at stations within the company's management picked up. A total of 593.15 million passengers were sent in 2023, an increase of 123.7% year-on-year, achieving passenger revenue of 10.73 billion yuan, an increase of 60.5%. Among them, Guangzhou-Shenzhen intercity trains/direct trains/long-distance buses achieved revenue of 31.7/15.6/5.40 billion yuan, an increase of 109.9% /100.0 billion yuan over the previous year %/ 18.6% At the same time, along with the recovery in demand for railway passenger transportation, the number of trains operated by other railway companies to stations within the company's jurisdiction and the operating services provided by the company increased simultaneously, driving the company's revenue from services such as road network clearing and railway operation to increase 16.0% year-on-year, achieving revenue of 12.09 billion yuan.
Shipment volume declined year on year. Benefiting from cargo restructuring and maintaining growth in freight revenue, affected by factors such as falling export growth, the company's cargo delivery volume fell 3.3% year on year in 2023. By upgrading the product structure, the company increased the proportion of high-value-added goods, which led to a year-on-year increase in freight revenue. In 2023, the company achieved freight revenue of 1.83 billion yuan, an increase of 13.1% over the previous year.
Operating cash flow turned positive, and gross margin increased 18 pcts year over year
In 2023, the company's operating cost was 24.55 billion yuan, up 10.0% year on year, overall gross margin was 6.3%, up 18.2pct year on year, net profit margin was 4.0%, and profitability rebounded. The company's cash flow situation improved significantly. Net operating cash flow in 2023 was $1,116 billion, an increase of $1.31 billion compared to 2022, and the balance of cash and equivalent at the end of the period increased by 180 million yuan year-on-year.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 281.62/298.17/31,568 billion yuan, respectively, with year-on-year growth rates of 7.51%/5.87%/5.88%; net profit to mother of 12.06/13.34/1,421 billion yuan, respectively, with year-on-year growth rates of 13.97%/10.61%/6.54%; 3-year CAGR of 10.33% and EPS of 0.17/0.19/0.20 yuan respectively. Following the transformation of Guangzhou Railway Station and Guangzhou East Railway Station into high-speed rail stations, the company is expected to fully enter the high-speed rail operation field. Referring to comparable company valuations, the company will be given 20 times PE in 2024, corresponding to a target price of 3.4 yuan, and maintain the “gain” rating.
Risk warning: Railway passenger demand falls short of expectations; newly opened line capacity falls short of expectations; road network diversion.