Incidents:

In 2023, the company achieved operating income of 81.02 billion yuan, an increase of 6.95% over the previous year, and achieved net profit of 11.930 billion yuan to mother, an increase of 6.55% over the previous year. Among them, in Q4 2023, the company achieved revenue of 20.023 billion yuan, a year-on-year increase of 19.00%, and achieved net profit of 819 million yuan to mother, an increase of 112.17% over the previous year.

In Q1 2024, the company achieved operating income of 18.268 billion yuan, a year-on-year decrease of 7.92%; realized net profit to mother of 3,046 billion yuan, a year-on-year decrease of 16.65%. In 2023, the company paid a cash dividend of 0.44 yuan per share, with a dividend rate of about 58.08%.

In 2023, the company's freight/passenger revenue increased by 0.8%/119.0% respectively. In 2023, the company delivered 730 million tons of goods, an increase of 7.3% over the previous year, of which 620 million tons of coal were sent, an increase of 10.7% over the previous year. The Daqin Line completed a freight volume of 420 million tons, an increase of 6.4% over the previous year.

In 2023, the company completed freight business revenue of 61.24 billion yuan, an increase of 0.8% over the previous year. In 2023, the company sent 42.84 million passengers, an increase of 111.5% over 2022; completed passenger revenue of 8.92 billion yuan, an increase of 119.0% over the previous year. The Haoji Railway and Shuohuang Railway contributed 2.54 billion yuan to investment income, a year-on-year decrease of 5.98%, mainly due to a 7.93% year-on-year decline in net profit of the Shuohuang Railway in '23.

The company announced a three-year dividend plan, with a dividend rate of not less than 55% for 23-25. The company issued the “Three-Year (2023-2025) Shareholder Dividend Return Plan”. The company's annual cash dividend ratio for 2023-2025 is not less than 55% of the total net profit returned to the mother for the year. In 2023, the company's total dividend amount was 6.929 billion yuan, and the dividend rate was about 58.08%. The company adjusted the amount of cash dividends per share based on the total number of shares registered on the profit distribution and distributed a cash dividend of 0.44 yuan per share. Based on the closing price on April 26 and the latest share capital, the company's dividend ratio is estimated to be approximately 5.30%.

The cargo volume of the Q1 Daqin Line fell 6.0% in 2024, leading to a 7.9% year-on-year decline in revenue. In January-March, the Daqin Line completed a cumulative total of 98.24 million tons of cargo transportation, a decrease of 6.02% over the previous year. The company expects to send 720 million tons of goods in 2024, converted to a turnover of 395 billion tons and kilometers, with changes of -1.37% and 0.48% respectively from 2023; of these, the Daqin Line cargo traffic volume is 410 million tons, down 2.38% from 2023.

Profit Forecasts, Valuations, and Ratings

Considering the weak performance of railway coal traffic since 2024, we expect the company's revenue for 2024-2026 to be 818.44/842.07/86.609 billion yuan, with year-on-year growth rates of 1.02%/2.89%/2.85%, respectively; net profit to mother of 110.65/113.72/11.624 billion yuan, respectively, with year-on-year growth rates of -7.25%/2.78%/2.22%; EPS, respectively. Referring to comparable company valuations, the company was given 12 times PE in 2024, corresponding to a target price of 7.56 yuan, maintaining the “gain” rating.

Risk warning: Macroeconomic growth is slowing; freight volume growth falls short of expectations.