China Railway released its 2024 three-quarter report. According to financial reports, 24Q1-3 achieved revenue of 820.3 billion yuan/year over year, net profit of 20.6 billion yuan/year on year -14%, net profit of 19 billion yuan/year on year -16%; of these, 24Q3 revenue was 275.8 billion yuan/year over year -6%, net profit to mother of 6.29 billion yuan yoy -19%, deducting non-net profit of 5.92 billion yuan/year on year.

The cost rate for the period increased, and the cash flow improved slightly. According to financial reports, ① The cost rate for the period: 24Q1-3, the company's expenses rate for the period (excluding R&D) was 3.09%/+0.09pct, with sales/management/finance expenses ratios of 0.53%/2.15%/0.41%, respectively, +0.03/+0.02/+0.04pct year-on-year.

② Cash flow: 24Q1-3, net operating cash flow outflow of 71.3 billion yuan/year-on-year increase of 37.5 billion yuan; 24Q3 net operating cash flow outflow of 1.9 billion yuan/year-on-year decrease of 1.8 billion yuan. ③ Depreciation situation: In 24Q3, total credit/asset impairment was 0.92 billion yuan, an increase of 0.69 billion yuan over the previous year.

Equipment manufacturing revenue increased, and the real estate development business performed well. According to financial reports, ① infrastructure construction: 24Q1-3 achieved revenue of 713.2 billion yuan/ -8%, gross profit margin 7.6% /-0.4pct; 24Q3 revenue 240.1 billion yuan/-9% YoY, gross profit margin 6.9%/-1.6 pct. ② Design consultation:

24Q1-3 revenue 12.85 billion yuan/year over year -4%, gross profit margin 24.5% /year over year -2.7 pct; 24Q3 revenue 3.89 billion yuan/year over year -4%, gross profit margin 20.6% /y -5.2 pct. ③ Real estate development:

24Q1-3 revenue 21.9 billion yuan/ -13%, gross profit margin 12.7% /-0.3 pct; 24Q3 revenue 7.43 billion yuan/year over year +72%, gross profit margin 12.9% /year over year +9.4pct, ④ Equipment manufacturing: 24Q1-3 revenue 19.8 billion yuan/year over year -1%, gross profit margin 22.7% /year on year +1.2pct: 24Q3 revenue 7.82 billion yuan/year on year +16%, gross profit margin 29.5% /year over year +4.5pct. Resource utilization: 24Q1-3 revenue 5.76 billion yuan/ -11%, gross profit margin 54.3%/-4.1pct; 24Q3 revenue 1.71 billion yuan/-37% YoY, gross profit margin 56.4%/-1.5pct YoY.

Profit forecasting and investment advice. In the context of debt conversion, the company is expected to recover its cash flow and improve the signing of new orders. The company's net profit for 24-26 is estimated to be 29.8/31.1/32.3 billion yuan. Referring to comparable companies, the company's A shares were given a PE valuation of 7 times in 24 years, corresponding to a reasonable value of 8.42 yuan/share. Based on the AH discount premium, H shares were given a reasonable value of HK$5.07 per share, all maintaining a “buy” rating.

Risk warning: Infrastructure investment falls short of expectations, commodity price fluctuations, geopolitical risks.