Shenwan Hongyuan Securities·2025-12-23 15:23Investment Rating - The report initiates coverage with an "Outperform" rating for China Railway Group Limited (00390) [1][7] Core Insights - The report highlights that the company's valuation is expected to recover due to the optimization of financial statements and the performance of its resource segment [6][18] - It emphasizes the improvement in new contract signings and the robust backlog of orders, ensuring stable long-term growth [6][16] - The resource segment is noted for enhancing profitability and cyclicality resistance, with significant reserves of copper, cobalt, and molybdenum [6][25] - The report points out the attractive dividend yield of H-shares compared to A-shares, indicating a clear discount in valuation [6][33] Financial Data and Profit Forecast - Revenue projections for 2023 to 2027 are as follows: - 2023: 1,263.41 billion RMB - 2024: 1,160.31 billion RMB - 2025E: 1,156.73 billion RMB - 2026E: 1,164.20 billion RMB - 2027E: 1,179.18 billion RMB - The expected growth rates are: - 2023: +9.45% - 2024: -8.16% - 2025E: -0.31% - 2026E: +0.65% - 2027E: +1.29% [5][36] - Net profit attributable to ordinary shareholders is forecasted as follows: - 2023: 33.48 billion RMB - 2024: 27.89 billion RMB - 2025E: 25.16 billion RMB - 2026E: 24.95 billion RMB - 2027E: 25.85 billion RMB [5][36] Order and Contract Insights - The company has signed new contracts amounting to 2.73 trillion RMB in 2021, 3.03 trillion RMB in 2022, 3.10 trillion RMB in 2023, 2.72 trillion RMB in 2024, and 1.58 trillion RMB in 2025 (Q1-Q3), with a year-on-year growth of +4.7%, +11.1%, +2.2%, -12.4%, and +3.7% respectively [6][16] - As of Q3 2025, the company has a backlog of contracts worth 7.54 trillion RMB, ensuring stable revenue for the upcoming years [6][16] Resource Segment Performance - The resource utilization segment's revenue from 2021 to 2025 (Q1-Q3) is as follows: - 2021: 5.96 billion RMB - 2022: 7.50 billion RMB - 2023: 8.37 billion RMB - 2024: 8.16 billion RMB - 2025 (Q1-Q3): 6.22 billion RMB - The segment's gross margin is reported at 59.45% for 2025 (Q1-Q3) [6][25] Valuation and Market Comparison - The report suggests a target market capitalization of 999 billion RMB for 2026, translating to 1,102 billion HKD, indicating a potential upside of 16.6% from the current market cap of 945 billion HKD [6][41] - The report compares the company's valuation with peers, noting that the average PE for comparable companies is 4.2X for 2025 and 4.0X for 2026 [6][41]