Core views:
Guangzhou-Shenzhen Railway released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved operating income of 6.60 billion yuan/yoy +7%, compared with 129% in 2019; net profit to mother was 547 million yuan, net profit after deducting non-return net profit of 541 million yuan, an increase of 142 million yuan and 141 million yuan, respectively.
Business resumed to a higher level, with revenue of 454 million yuan year-on-year in the first quarter: 1Q rail travel demand continued to recover. According to the company's operating data announcement, the company's stations sent 18.0363 million passengers/yoy +49% in the first quarter of 2024. With strong demand growth, the company's 1Q revenue increased by 454 million yuan year-on-year to 6.6 billion yuan/yoy +7.4%.
The growth logic showed that 1Q24's performance hit a record high for the same period in history: on the cost side, the company's 1Q24 increased by 258 million yuan year-on-year to 5.861 billion yuan/yoy +4.6%, and the gross margin reached 12.2% /yoy+2.2pp in a single quarter. By continuing to enter the high-speed rail operation sector, 1Q24's net profit to mother increased 35.1% year-on-year to 547 million yuan, the highest level in the first quarter since listing.
The popularity of communication between Hong Kong and the mainland is increasing, and it is expected that the value of road products will be reassessed: after customs clearance at ports resumes, the travel and consumer demand for Hong Kong people going north and visitors going south will continue to heat up, the timeliness and convenience advantages of the high-speed rail crossing Hong Kong will continue to be highlighted, and the number of trains will continue to be encrypted. Meanwhile, the high-speed rail renovation project for the company's two major hubs, Guangzhou East and Guangzhou Railway Station, is still in progress, and there is room for future increases in both volume and price. As road network synergy continues to show, the company's capacity utilization rate and profit margins are expected to be further opened up, and the path of value revaluation has begun.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be RMB 12.53, 12.84, and RMB 1,376 billion. Referring to comparable companies and considering the A/H share premium factors, the 24-year A/H shares are given a PE of 22X/15X, respectively, and a reasonable value of each A/H share of the corresponding company is 3.89 yuan/2.92 HKD, respectively. For the first time, coverage gives a “gain” rating.
Risk warning: economic fluctuations, fluctuating demand, natural weather disasters, infrastructure falling short of expectations, etc.