Incidents:
On April 29, 2024, the Beijing-Shanghai High Speed Rail released the 2023 Annual Report and the 2024 Quarterly Report:
In 2023, the company achieved revenue of 40.683 billion yuan, +110.40% year on year; net profit of 11.546 billion yuan year on year; net profit after deducting non-return to mother of 11,549 billion yuan, turning loss into profit year on year; 2023Q4 revenue of 9.801 billion yuan, +138.46% year on year; net profit to mother of 2,631 billion yuan, +461.34% year on year; net profit without return to mother of 2,633 billion yuan, +447.79% year over year.
2024Q1 achieved revenue of 10.106 billion yuan, +13.06% year over year; net profit to mother of 2,963 billion yuan, +33.11% year over year; net profit after deducting non-return to mother of 2,963 billion yuan, +33.11% year over year.
In addition, the company announced the dividend plan. On December 31, 2023, the total share capital was 49.106 billion shares, and a cash dividend of 1.116 yuan (tax included) was distributed for every 10 shares, for a total cash dividend of 5.479 billion yuan, with a corresponding dividend rate of about 47.5% and a dividend rate of 2.19% (as of the closing price of April 30, 2024).
Investment highlights:
Passenger traffic recovered rapidly, and 2024Q1 revenue continued to increase year-on-year after the epidemic. The Beijing-Shanghai high-speed rail main line carried 53.252 million passengers in 2023, +209.1%, or 99.9% in the same period in 2019; the operating mileage of cross-line trains completed 92.044 million train kilometers, +66.2% compared to 2019; the company's passenger transport business and road network business revenue in 2023 was +2.8% and 42.3% respectively. According to data from the National Bureau of Statistics, the 2024Q1 railway passenger traffic nationwide was 1,014 million, or +28.49%, or 118.9% in the same period in 2019. Driven by demand, the company's revenue in 2024Q1 was +13.06% year-on-year.
Jingfu Anhui reduced losses year on year, and the company's profitability increased month-on-month. In 2023, the operating mileage of trains on the routes under the jurisdiction of Jingfu Anhui Company reached 35.595 million kilometers, +53.7% year over year. The operating revenue in 2023 was 5.47 billion yuan, +53.3% year over year, and the net loss was 970 million yuan, which is a sharp decrease of 1.83 billion yuan compared to 2022 (net loss of 2.80 billion yuan in 2022). This and cross-line repairs combined the continuous decline in production capacity in Jingfu and Anhui, and the company's profit continued to rise. The net interest rate for 2024Q1 was 29.3%, +4.4pct and +2.5pct, respectively.
The golden location is the core asset. Buyback and dividends increase shareholder returns are one of the core assets of China's high-speed rail. Traffic on the Beijing-Shanghai Line has returned to the growth channel after the epidemic, and the value of the core assets of the golden location has been fully verified; the production capacity of Beijing, Fujian and Anhui climbed rapidly, driving the company's profitability to continue to improve. In the long run, there is room for improvement in the company's volume and price turnover, and it is expected to fully benefit from the increase in traffic brought about by ticket price reform and high-speed rail network encryption. Furthermore, on April 29, 2024, the company announced that it plans to repurchase shares through 1 billion yuan of its own capital, with a repurchase price of no more than 5.87 yuan/share, corresponding to about 0.35% of the total share capital. In addition to announcing a cash dividend rate of about 47.5% in 2023, it also promised that “except under special circumstances, when the company has no major investment plans or significant cash expenses, the profit accumulated by the parent company in cash shall be 50% of the distributable profit achieved by the parent company in the current year”, and shareholder returns are expected to increase in the long term.
Profit forecasts and investment ratings estimate that the operating income of the Beijing-Shanghai High Speed Rail in 2024-2026 will be 45.337 billion yuan, 48.620 billion yuan and 51,176 billion yuan, respectively, and net profit attributable to mother will be 13.627 billion yuan, 15.477 billion yuan and 16.790 billion yuan, respectively. The corresponding PE for 2024-2026 will be 18 times, 16 times and 15 times, respectively. As a high-quality high-speed rail core asset with both value and growth, the company has room for long-term growth in volume and price, and maintains a “gain” rating.
Risks suggest a decline in passenger travel volume; policy changes; parallel route diversion; fare control; and uncertainty about stock repurchase progress and dividends.