Incidents:
On April 29, 2024, Guangzhou-Shenzhen Railway released its 2024 quarterly report:
2024Q1 achieved revenue of 6.60 billion yuan, +7.4% year on year; net profit to mother of 550 million yuan, +35.0% year on year; net profit after deducting non-return to mother of 540 million yuan, +35.1% year on year.
Investment highlights:
There was a year-on-year high increase in passenger traffic in Q1, and cross-border passenger traffic is expected to continue to contribute to the 2024Q1 company's passenger traffic growth of 18.036 million, +49.4%; of these, the number of passengers sent by express train was 326,000, +130.8%, a rapid increase in cross-border passenger traffic; 4.489 million passengers were sent by intercity trains, +45.3% year over year; and the number of passengers sent by other vehicles was 11.188 million, +50.3% year over year. The total freight volume was 18.387 million tons, +7.5% year-on-year.
According to the Guangzhou Railway official account, starting April 6, 2024, the Shenzhen region will open 4 additional cross-boundary high-speed rail trains to Hong Kong and West Kowloon every Saturday, and 192 cross-boundary high-speed rail trains will be operated every Saturday after adjustment. Cross-border passenger traffic is expected to continue contributing to the growth in performance.
Network connectivity in the Bay Area continues to increase. Focus on the pace of traffic growth as a core railway asset in the Greater Bay Area. The company has taken the opportunity of the opening of the Gan-Shenzhen High Speed Rail and the Guangzhou-Shantou High Speed Rail to connect to the national high-speed rail network and operate high-speed rail trains in the form of a carrier, and the growth in passenger traffic has gradually materialized. In the long run, new lines such as the Guangzhan High Speed Rail in the Bay Area will be put into operation one after another; stations such as Guangzhou Railway Station and Guangzhou East Railway Station will also be renovated and upgraded to further help the company enter the field of high-speed rail operations.
Profit forecasts and investment ratings estimate that the Guangshen Railway's 2024-2026 revenue will be 28.324 billion yuan, 30.164 billion yuan and 31,611 billion yuan, respectively, and net profit to mother will be 1,305 billion yuan, 1,479 billion yuan and 1,555 billion yuan, respectively. The corresponding PE for 2024-2026 will be 18, 16, and 15 times, respectively. The company's strong cross-border passenger flow supports growth in the short term. It is expected to further enter the high-speed rail operation field in the medium to long term. Pricing capacity and traffic acquisition capacity will continue to improve, and maintain an “gain” rating.
Risks suggest that the repair in railway passenger demand falls short of expectations; the number of newly opened lines is lower than expected; the risk of price fluctuations in railway reform; the risk of parallel high-speed rail and highway diversion; and the renovation of important stations falls short of expectations.