Brief performance review
On April 12, 2024, the company released a performance forecast for the first quarter of 2024. The company expects to achieve net profit of 923 million yuan to 1,046 million yuan in the first quarter of 2024. Compared with the same period last year (statutory disclosure data), it is expected to increase 308 million yuan to 431 million yuan, an increase of 50%-70% over the previous year, and a high increase in operating performance.
Management analysis
Product delivery structure was optimized, and performance increased in the first quarter. According to the company's announcement, in the first quarter of 2024, the structure of products delivered by the company was optimized compared to the same period last year. Combined, the profit share for the first quarter of 2023 was relatively small. The company expects to achieve net profit of 923 million yuan to 1,046 million yuan in the first quarter of 2024, an increase of 50%-70% over the previous year, and a high increase in business performance.
Railway investment continues to rise, passenger traffic is recovering, and demand for rail transit equipment continues to recover. 1) Railway investment: According to the State Railway Administration, in 2023, the national railway fixed asset investment was 764.5 billion yuan, +7.5% year on year; 1-2 M24 national railway fixed asset investment was 65.2 billion yuan, +9.5% year over year, and the investment amount continued to rise. 2) Passenger traffic: According to the Ministry of Transport, China's railway passenger traffic reached 3.86 billion in '23, an increase of 130%. The 1-2 M24 railway passenger traffic volume was 693 million, an increase of 36.2% over the same period. As passenger traffic recovered, China's EMU tenders picked up. China Railway Group tenders for 164 EMUs (the “Fuxing” EMU with a speed of 350 kilometers per hour) in '23, +91% compared to the same period. Demand for rail transit equipment is picking up, and we are optimistic about the company's revenue growth in the new EMU vehicle construction business.
Level 5 EMU maintenance has entered a period of explosion, and it is optimistic that maintenance business will increase in 2024. EMU operation requires level 5 maintenance for 4.8 million kilometers or about 12 years. According to the National Railway Administration, EMU ownership increased 200% in five years from 2011 to 2016, corresponding to the explosion period of level 5 maintenance in about 23 years. According to the China Railway Group Tendering Network, 361 EMU advanced repair groups were first tendered in 2024, of which 207 were grade 5 repair groups. The scale of the first advanced repair tender exceeded the full year of 2023 (290 advanced repair groups in 2023, of which 108 grade 5 repair groups). From December 2023 to March 2024, the company signed an advanced EMU repair order of 14.78 billion yuan, accounting for 6.6% of 2022 revenue, and the order amount was quite large. Level 5 repairs will replace EMU parts on a large scale, and I am optimistic about the rapid growth of the company's EMU maintenance business.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue in 24-26 to be 2588/285/ 313.5 billion yuan, net profit to mother of 137/154/16.7 billion yuan, corresponding PE to 14X/13X/12X, maintaining a “buy” rating.
Risk warning
Railway fixed asset investment falls short of expectations; overseas business expansion falls short of expectations; development of new industries falls short of expectations; risk of exchange rate fluctuations.