Guangshen Railway(SH:601333) Huafu Securities·2024-07-16 00:30Investment Rating - The report gives a "Buy" rating for the company with a target price of 4.22 CNY, based on a projected price-to-book (PB) ratio of 1.1 for 2024 [3][11]. Core Insights - The company is experiencing a significant recovery in revenue and profitability, with a 31.3% year-on-year increase in revenue for 2023, reaching 26.19 billion CNY, and a 60.5% increase in passenger revenue [2][30]. - The company is at a critical transformation point, actively expanding cross-line trains and upgrading the Hong Kong direct train service to high-speed rail, which is expected to enhance profit margins [3][11]. - The ongoing renovations of Guangzhou and Guangzhou East stations will enable full integration into the high-speed rail network, further boosting performance [2][3]. Summary by Sections Revenue Growth and Profitability - The company's main business includes passenger and network clearing services, accounting for over 80% of total revenue. Revenue has steadily increased, with a notable recovery in 2023 after the pandemic [2][30]. - The company achieved a revenue of 26.19 billion CNY in 2023, a 31.3% increase year-on-year, with passenger revenue reaching 10.73 billion CNY, up 60.5% [2][30]. - The gross margin has improved, recovering from negative values during the pandemic to 6.3% in Q1 2023 and 12.2% in Q1 2024 [2]. Expansion of Services - The company is increasing the number of cross-line trains and long-distance services, which is expected to absorb passenger flow and enhance average ticket prices. By June 2024, the company will operate 80 pairs of intercity trains [2][3]. - The resumption of the direct train service to Hong Kong has significantly contributed to profitability, with the latest schedule adjustments leading to increased frequency and pricing [2][3]. Infrastructure Development - Renovations at Guangzhou and Guangzhou East stations are set to enhance the company's operational capabilities, allowing for a transition from conventional passenger services to high-speed rail operations [2][3]. - The completion of the Guangzhou Baiyun station in December 2023 will facilitate the integration of existing lines with high-speed rail, further improving operational efficiency and revenue potential [2][3]. Financial Projections - The company is projected to achieve revenue growth rates of 11.8%, 4.4%, and 3.2% for 2024-2026, with net profit growth rates of 38.0%, 8.6%, and 4.0% respectively [3][11]. - The earnings per share (EPS) are expected to be 0.21 CNY, 0.22 CNY, and 0.23 CNY for the years 2024, 2025, and 2026 [3].