Datong-Qinhuangdao Railway Disclosure of Triple report 2023

Daqin Railway disclosed that in the first three quarters of 2023, the company's operating income was 60.8 billion yuan, an increase of 3.5 percent over the same period last year, and its net profit was 11.11 billion yuan, an increase of 2.8 percent over the same period last year. In the third quarter, the company realized operating income of 20.36 billion yuan, an increase of 2.6 percent over the same period last year. The net profit reached 3.57 billion yuan, an increase of 2.3 percent over the same period last year.

The volume of Daqin line is basically stable, and the revenue increases slightly compared with the same period last year.

The freight volume of the Daqin line in the third quarter was 108 million tons, down 2.1% from the same period last year, and basically remained stable. Passenger transport is expected to perform well due to the recovery of passenger flow, driving revenue to maintain a small growth.

The cost is basically stable, and the performance is in line with expectations.

Due to the slight decline in the company's cargo volume but the increase in passenger transport business, the company's operating costs are basically stable, at 15.63 billion yuan in the third quarter, an increase of 3.2% over the same period last year. The company's gross profit in the third quarter was 4.72 billion yuan, up 0.8% from the same period last year, and its gross profit margin was 23.2%, down 0.4pct from the same period last year. On the expense side, the company's sales expense rate and management expense rate in the third quarter were 0.28% and 0.91% respectively, which decreased 0.02pct and increased 0.15pct respectively compared with the same period last year, while the financial expense rate decreased to-0.08% due to the increase in interest income. The investment income of the company in the third quarter was 720 million yuan, an increase of 120 million yuan over the same period last year, the rest of the report items were basically stable, and the company's performance was basically in line with expectations.

Profit forecast and investment advice

Considering the low performance base of the company in the fourth quarter of 2022, based on the assumption that the company's annual operation will remain stable in 2023 and the business volume will maintain a small growth in 2024-2025, the operating income from 2023 to 2025 is expected to be 81.8 billion yuan, 84.31 billion yuan and 87.07 billion yuan, an increase of 8.0%, 3.1% and 3.3% respectively over the same period last year, and the net profit is 12.88 billion yuan, 13.7 billion yuan and 137.7 billion yuan respectively. Year-on-year growth of 15.1%, 6.4%, 0.5%, respectively. The closing price on October 26, 2023 corresponds to the PE valuation of the expected EPS for 2023-2025 at 8.7x, 8.1x and 8.1x, respectively. If it is simply calculated according to the dividend rate of the 2022 annual report, the company's current share price still has a dividend yield of about 7.5% in 2023, giving a "overweight" rating for the first time.

Risk Tips:

Macro-economic decline, freight volume is not as expected, railway freight rates have not been adjusted for a long time, safety accidents.