Core views:
China Railway released its 2024 quarterly report. According to financial reports, in 24Q1, the company achieved revenue of 265 billion yuan, -2.6% year-on-year; gross profit margin was 8.73%, a year-on-year decrease of 0.35 pct. Achieved net profit of 7.481 billion yuan, -5.0% year on year; deducted non-net profit of 7.169 billion yuan, -3.3% year over year.
Revenue from the infrastructure and design consulting business increased slightly, and the rest of the sectors were under pressure in stages. By sector, infrastructure business revenue was 235.6 billion yuan/year over year +0.37%, gross profit margin 7.62% /year over year -0.01pct; design consulting revenue 4.777 billion yuan/year over year +1.1%, gross profit margin 23.60% /year over year +0.67pct; equipment manufacturing revenue 6.628 billion yuan/year over year -8.8%, gross profit margin 21.25% /year on year +0.22pct; real estate development revenue 4.183 billion yuan/year over year -0.26pct; gross profit margin 17.74% /y -0.26pct; resource utilization Receive 1,431 billion yuan/-27.1%, gross profit margin 53.78% /y-3.83 pct.
The cost rate remained stable during the period. According to financial reports, in 24Q1, the company's cost rate for the period (excluding R&D) was 3.41%, slightly higher than 0.08pct, with sales/management/finance expense ratios being 0.51%/2.53%/0.38%, respectively, -0.05/+0.16/ -0.03pct; the company's net operating cash flow outflow was 68.1 billion yuan, an increase of 30 billion yuan over the previous year, mainly due to centralized payment of project payments, labor payments and material payments due to tight capital of some project owners.
There has been a high increase in new overseas signings, and rising mineral prices are optimistic about the flexibility of the resource business. In 24Q1, new signings amounted to 621.6 billion yuan, -7% year on year; new overseas signings amounted to 49.2 billion yuan, +23% year over year. According to Wind, as of April 26, the average price of copper/nickel/lead tonnes in 24Q2 was $9433/18080/2124, respectively, up 12%/9%/2% from the 24Q1 average price. The average price of molybdenum concentrate was 3,358 yuan/ton, an increase of 1% over 24Q1.
Equity incentives release vitality and are expected to drive performance growth. The assessment conditions include: based on 2020, the 22-24 non-net profit CAGR will not be less than 12%. According to the assessment conditions, the company's deducted non-net profit in 2024 will reach 34.4 billion yuan (+11.3% YoY) to be successfully unlocked.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated at 376/415/45.7 billion yuan. Maintain the company's judgment that the reasonable value of A shares is 9.11 yuan/share and that the reasonable value of H shares is HK$5.18 per share, all maintaining a “buy” rating.
Risk warning: Infrastructure investment falls short of expectations, commodity price fluctuations, geopolitical risks.