Beijing-Shanghai high-speed rail: the core asset of China's high-speed rail
The company mainly engages in railway transportation business. According to products, it can be divided into two major businesses: passenger transport business and road network service.
The company owns the Beijing-Shanghai high-speed railway and the 2,500km railway line of the Hebang Railway, the Anhui section of the Hefu Railway, the Anhui section of the Shanghai-Hangzhou Railway, and the Anhui section of the Zhengfu Railway under the administration of the Beijing-Fu Anhui Company. They are all high-standard high-speed railways with a design speed of 350 km/h. They are an important part of the main high-speed rail artery in eastern China and the “eight vertical and eight horizontal” high-speed rail network.
Passenger transport business: There is still room to improve capacity during peak periods. Floating fares release potential demand. The company's passenger transport business revenue comes from EMU trains operating on the Beijing-Shanghai High Speed Rail Main Line. The company entrusts railway administrations along the route to provide high-speed rail transportation services and collect ticket prices for passengers taking the train in charge. The Beijing-Shanghai high-speed railway has the triple advantages of high speed, high punctuality, and proximity to urban areas. 1) Volume: The increase in passenger traffic on the main line is facing a bottleneck, and the passenger transport business revenue growth is slow. The main reason for this is the diversion of passengers between the main lines due to the increase in the number of cross-line trains operating. We believe that during peak periods when occupancy rates are high, capacity supply can still be increased by increasing the proportion of long train groups, speeding up, etc., to meet the spillover demand of passengers during peak periods.
2) Price: As China's high-speed rail fare market-based reform continues to advance, Beijing-Shanghai high-speed rail fares are generally on an upward trend. The implementation of the floating fare mechanism has enabled passenger demand to be effectively guided through the price mechanism, which can release the potential demand for off-season travelers.
Road network services: Newly built lines are connected to continuous drainage. The Beijing-Fu-Anhui profitable road network service business refers to the business of providing services such as line use and contact network use and charging corresponding fees when trains operated by the Beijing-Shanghai High Speed Rail and high-speed railways controlled by its subsidiary Beijing-Fuzhou Anhui. 1) Volume: The rapid increase in the number of cross-line trains operating has led to a strong increase in the company's road network service revenue. The operating mileage of Beijing-Fujian-Anhui line trains is growing faster than the operating mileage of Beijing-Shanghai high-speed rail cross-line trains, making it a new growth point for the company's business. The connection of new crossing lines has increased the company's performance. Although parallel lines will be built and opened to traffic in the future, the overall diversion effect will be less than drainage. 2) Price: China Railway Group has the power to set fees for road network services. The frequency of price adjustments is low, and it is expected that there will be no price adjustments in the short term.
Covered for the first time, a “gain” rating was given.
We expect the revenue of the Beijing-Shanghai high-speed railway in 2024-2026 to be 42,99/454.9/48.23 billion yuan respectively, up 5.7%/5.8%/6.0% year on year; net profit to mother was 132.6/147.7/16.41 billion yuan, up 14.8%/11.4%/11.1% year on year; corresponding EPS was 0.27, 0.30, 0.33 yuan/share, and PE 20x, 18x, 16x, respectively. Based on the PEG valuation, the company's corresponding target price is 6.07 yuan/share, giving it an “gain” rating.
Risk warning: macroeconomic risks; policy and regulatory risks; transportation safety risks; impact of diversion of new routes; air and rail competition heightens risks; cross-line train operating volume falls short of expectations; risks involved in company-related arbitration have not yet been adjudicated.