CHINA RAILWAY(601390) 广发证券·2024-11-21 09:23Investment Rating - The report maintains a "Buy-A/Buy-H" rating for China Railway Group (601390 SH/00390 HK) with a target price of 8 42 CNY for A-shares and 5 07 HKD for H-shares [6] Core Views - China Railway Group reported a decline in revenue and net profit for Q3 2024 with revenue at 8203 billion CNY (-7% YoY) and net profit at 206 billion CNY (-14% YoY) [3] - Despite the profit pressure cash flow improved in Q3 with operating cash flow narrowing to a net outflow of 19 billion CNY compared to 37 billion CNY in the same period last year [3] - The company's equipment manufacturing segment showed strong growth with Q3 revenue increasing by 16% YoY to 78 2 billion CNY and gross margin rising by 4 5pct to 29 5% [3] - Real estate development also performed well in Q3 with revenue surging 72% YoY to 74 3 billion CNY and gross margin improving by 9 4pct to 12 9% [3] Financial Performance Summary Revenue and Profit - Q1-3 2024 revenue was 8203 billion CNY (-7% YoY) with Q3 revenue at 2758 billion CNY (-6% YoY) [3] - Q1-3 net profit was 206 billion CNY (-14% YoY) with Q3 net profit at 62 9 billion CNY (-19% YoY) [3] - EBITDA for 2024E is projected at 65718 million CNY with a slight increase to 70282 million CNY by 2026E [5] Segment Performance - Infrastructure construction revenue for Q1-3 was 7132 billion CNY (-8% YoY) with a gross margin of 7 6% (-0 4pct YoY) [3] - Design consulting revenue for Q1-3 was 128 5 billion CNY (-4% YoY) with a gross margin of 24 5% (-2 7pct YoY) [3] - Resource utilization revenue for Q1-3 was 57 6 billion CNY (-11% YoY) with a gross margin of 54 3% (-4 1pct YoY) [3] Cash Flow and Expenses - Operating cash flow for Q1-3 was a net outflow of 713 billion CNY (375 billion CNY more than the previous year) [3] - The company's expense ratio (excluding R&D) increased by 0 09pct to 3 09% with sales management and financial expense ratios all rising slightly [3] Future Projections - The report forecasts net profit for 2024-2026 to be 298 billion CNY 311 billion CNY and 323 billion CNY respectively [3] - EPS is expected to be 1 20 CNY in 2024E increasing to 1 31 CNY by 2026E [5]