2023 Annual Report Meets Expectations, 1Q24 Results Exceed Expectations
The company's revenue in 2023 was 40.68 billion yuan, +110.4% year-on-year; net profit to mother was 11.55 billion yuan, reversing losses year on year. The performance was in line with our and market expectations.
1Q24 achieved revenue of 10.11 billion yuan, +13.1% year over year, compared with 1Q19 +26.2%; net profit to mother was 2.96 billion yuan, +33.1% year over year, compared with 1Q19 +25.2%, and the performance exceeded our and market expectations. We believe the reasons why the performance exceeded expectations: 1) the operation of the Beijing-Shanghai cross-line train exceeded expectations, and 2) the sharp reduction in losses in Beijing and Anhui was close to the break-even point.
Development trends
The Beijing-Shanghai road network business performed brilliantly. 1) Road network business: The company achieved cross-line train operating mileage of about 92.044 million train kilometers in 2023, +66.2% year over year, up from 16.5% in 2019; the company's road network business achieved revenue of 24.22 billion yuan in 2023, +74.6% year over year. We believe that the cross-line vehicle network business may continue its high year-on-year trend in 2024; 2) Passenger transportation business: main line trains carried 53.252 million passengers in 2023, +209.1% year-on-year, basically the same as in 2019; the company's passenger transportation revenue in 2023 was about 16.08 billion yuan, +215.6% year-on-year, and +2.8% compared to 2019.
In 1Q24, Jingfu and Anhui cut losses sharply, close to the break-even point. The company announced that Jingfu Anhui lost about 970 million yuan in 2023, contributing 630 million yuan in losses to the company; based on 1Q24 minority shareholders' equity, we estimate that Jingfu Anhui achieved a loss of about 46 million yuan in 1Q24, a year-on-year loss of about 200 million yuan, which is close to the break-even point.
Cash flow has improved dramatically, and declining interest-bearing debt has led to a reduction in financial costs. In 2023, the company achieved operating cash flow of 21.08 billion yuan, a significant improvement over the previous year and a record high. In addition, the company's net debt repayment in 2023 was about 9.13 billion yuan. The company's interest expenses in 2023 fell 16.4% year on year, and 1Q24 interest expenses fell 19.5% year on year. The company's balance ratio in 1Q24 was 24.7%, down 3.4ppt from 1Q23.
Profit forecasting and valuation
Due to the impressive performance of the road network business and the sharp improvement in cash flow, we raised our 2024 profit forecast by 9.1% to 14.30 billion yuan, an increase of 23.9% year on year, and introduced profit of 16.27 billion yuan for 2025, an increase of 13.8% year on year. The current stock price corresponds to the 2024/25 price-earnings ratio of 17.6x/15.4x, maintaining the outperforming industry rating and target price of 6.14 yuan/share. The target price corresponds to the 2024/25 price-earnings ratio of 21.1x and 18.5x, with 19.9% upside compared to the current stock price.
risks
Due to the complicated weather, travel fell short of expectations, and the Beijing-Fu-Anhui road network business fell short of expectations.