Daqin Railway discloses 2023 annual report and 2024 quarterly report

Daqin Railway disclosed its 2023 annual report and 2024 quarterly report. The company's revenue in 2023 was 81.02 billion yuan, up 7.0% year on year, achieving net profit of 11.93 billion yuan, up 6.6% year on year; in the first quarter of 2024, the company's revenue was 18.27 billion yuan, down 7.9% year on year, and net profit to mother was 3.05 billion yuan, down 16.7% year on year.

The volume of goods increased in 2023, and the volume of goods in the first quarter was disrupted

In 2023, the company delivered 726 million tons of goods, up 7.3% year on year, and goods arrived at 623 million tons, up 0.9% year on year. Among them, the core line of the Daqin Line had a cargo volume of 422 million tons, up 6.4% year on year, and freight business revenue of 61.24 billion yuan, up 0.8% year on year. In terms of passenger transport business, the passenger transport business revenue was 8.92 billion yuan, up 119.0% year on year, while other business revenue declined slightly year on year. In the first quarter of 2024, coal safety supervision in Shanxi became stricter, and production declined. The traffic volume of the Daqin Line, the company's core line, fell 6.0% year on year in the first quarter, hampering revenue performance.

Costs are rising at the same time, costs are stable, and performance is slightly lower than expected

With the increase in passenger traffic volume, the costs related to the passenger transport business increased in the company's operating costs in 2023, compounded by the increase in employee remuneration. In 2023, the company's operating cost was 64.28 billion yuan, up 6.0% year on year. Among them, the company's operating cost for the fourth quarter of 2023 was 18.49 billion yuan, up 12.6% year on year; in the first quarter of 2024, the company's operating cost was 14.39 billion yuan, down 3.0% year on year. In 2023, the investment income contributed by the Shuohuang Railway declined. The investment income of the Haoji Railway was basically stable year on year, and the annual investment income declined; the company's investment income increased year-on-year in the first quarter of 2024. Overall, due to costs exceeding expectations, the company's performance in the fourth quarter of 2023 fell short of expectations. The company's performance in the first quarter of 2024 fell short of expectations due to a year-on-year decrease in cargo volume.

Investment advice

The company's overall cargo volume was under pressure in 2024. In its annual report, the company mentioned that the cargo volume target for the year of the Daqin Line was 410 million tons, a year-on-year decline. Combined with railway policy guidance to reduce logistics costs, the 2024-2025 profit forecast was lowered by 18.4% and 17.2% from 13.70 billion yuan to 11.17 billion yuan and 11.4 billion yuan respectively, down 6.4% and 2.1% year-on-year respectively. The 2026 profit forecast is expected to return to mother net profit in 2026 $115.5 billion. The company updated its shareholder return plan. The dividend rate for 2023-2025 is expected to be no less than 55%. Compared with the previous dividend rate, it is lower than the previous dividend rate, and it maintains an “gain” rating.

Risk warning:

Coal traffic falls short of expectations, freight rates have been reduced, and safety incidents have occurred.