Incident Overview

On April 26, the company issued an announcement stating that in 2023, the company achieved operating income of 81,020 billion yuan, a year-on-year increase of 6.95%; net profit to mother of 11.930 billion yuan, an increase of 6.55%; net profit after deducting non-return to mother was 11.958 billion yuan, an increase of 7.43% over the previous year. At the same time, the company announced the 2023 profit distribution plan, which plans to distribute a cash dividend of 0.44 yuan (tax included) per share, for a total cash dividend of 6.929 billion yuan.

In addition, according to the announcement, in the first quarter of 2024, the company achieved operating income of 18.268 billion yuan, a year-on-year decrease of 7.92%; net profit to mother of 3,046 billion yuan, a year-on-year decrease of 16.65%; and net profit without return to mother of 3,042 billion yuan, a year-on-year decrease of 16.85%.

Analysis and judgment

Business volume: According to data from the National Bureau of Statistics, domestic raw coal production was 4.71 billion tons in 2023, an increase of 3.4% over the previous year. Among them, the company's main source of raw coal production in the three provinces of Jinshan, Shaanxi, and Mongolia totaled 3.33 billion tons, an increase of 100 million tons, accounting for 70.7% of the country's total coal production. On the demand side, according to data from the National Bureau of Statistics, total coal consumption increased by 5.6% in 2023, and coal consumption accounted for 55.3% of total energy consumption. As a comprehensive railway transport enterprise focusing on coal transportation, the company delivered 730 million tons of goods in 2023, accounting for 14.5% of the country's total railway freight delivery volume of 5.04 billion tons; completed coal delivery volume of 620 million tons, accounting for 22.5% of the country's 2.75 billion tons of railway coal delivery. Among them, the Daqin Line completed a freight volume of 420 million tons, an increase of 6.4% over the previous year. The company's cargo delivery volume and coal delivery volume continue to occupy an important position in the national railway freight market.

From January to March 2024, the Daqin Line completed a total freight volume of 98.24 million tons, a year-on-year decrease of 6.02%. According to the announcement, in 2024, the company expects to complete delivery of 720 million tons of goods, a year-on-year decrease of 1.37%; the Daqin Line is expected to complete cargo transportation volume of 410 million tons, a year-on-year decrease of 2.86%.

Revenue side: The freight business is the main source of the company's business revenue. In 2023, freight revenue accounted for 77.09% of the company's main business revenue, and recorded revenue of 61,238 billion yuan, an increase of 0.80% over the previous year. The passenger transport business is an important part of the company's business. Passenger transportation revenue in 2023 accounted for 11.23% of the company's main business revenue, and recorded revenue of 8.919 billion yuan, an increase of 118.97% over the previous year.

Investment income: In 2023, the company recorded investment income of 2,539 billion yuan, a year-on-year decrease of 6.12%; of these, investment income in joint ventures and joint ventures was 2,536 billion yuan, down 6.14% year on year, mainly due to the year-on-year decline of 7.93% year-on-year to 2,468 billion yuan in Shuohuang Railway from 2,680 billion yuan in 2022.

Dividends: The company announced the 2023 profit distribution plan. It plans to distribute a cash dividend of 0.44 yuan (tax included) per share, a year-on-year decrease of 0.04 yuan/share from 2022, with a dividend rate of 58.08%. The company issued the “Three-Year (2023-2025) Shareholder Dividend Return Plan”. Except for special circumstances, the company should distribute dividends in cash every year, and the cash dividend ratio should not be less than 55% of the total net profit returned to mother for the year.

Investment advice

Considering that the company's cargo traffic volume is expected to be under pressure in 2024, and the Daqin Line is expected to complete the cargo transportation volume of 410 million tons, we forecast that the company's revenue for 2024-2026 will be 80,867 billion yuan, 82.80 billion yuan, and 85,119 billion yuan respectively, with year-on-year changes of -0.19%, +2.39% and +2.80%, respectively; net profit to mother will be 11.696 billion yuan, 12.055 billion yuan and 12.458 billion yuan respectively, corresponding to year-on-year changes of -1.96%, +3.07% and +3.34%, respectively EPS was 0.67 yuan, 0.69 yuan, and 0.71 yuan, and maintained a “buy” rating with price-earnings ratios of 10x, 10x, and 10x corresponding to the closing price on May 7, 2024.

Risk warning

The macroeconomy fell short of expectations; the energy structure underwent major changes; the “transit to rail” policy underwent major changes; and the impact of competitive route diversion increased.