GF SECURITIES·2024-05-03 07:32Investment Rating - The report maintains a "Buy" rating for both A-shares and H-shares of China Railway (601390.SH/00390.HK) with a target price of RMB 9.11 per share and HKD 5.18 per share respectively [4]. Core Views - China Railway reported a revenue of RMB 265 billion for Q1 2024, a year-on-year decrease of 2.6%. The gross margin was 8.73%, down by 0.35 percentage points. The net profit attributable to shareholders was RMB 7.48 billion, a decline of 5.0% year-on-year [2]. - The infrastructure and design consulting segments showed slight revenue growth, while other segments faced temporary pressure. Specifically, infrastructure revenue was RMB 235.6 billion (up 0.37% YoY), design consulting revenue was RMB 4.78 billion (up 1.1% YoY), equipment manufacturing revenue was RMB 6.63 billion (down 8.8% YoY), real estate development revenue was RMB 4.18 billion (down 46.9% YoY), and resource utilization revenue was RMB 1.43 billion (down 27.1% YoY) [2]. - The company experienced a net cash outflow of RMB 68.1 billion, primarily due to concentrated payments for engineering, labor, and materials before the Spring Festival, along with delayed payments from project owners [2]. - New overseas contracts signed increased significantly, with a total of RMB 621.6 billion in new contracts, a decrease of 7% year-on-year, while overseas new contracts reached RMB 49.2 billion, an increase of 23% year-on-year [2]. - The report highlights the potential for resource business flexibility due to rising mineral prices, with average prices for copper, nickel, and lead increasing by 12%, 9%, and 2% respectively in Q2 2024 compared to Q1 2024 [2]. - The company has set performance targets for stock incentives, aiming for a compound annual growth rate (CAGR) of non-recurring net profit of no less than 12% from 2022 to 2024, with a target of RMB 34.4 billion for 2024 [2]. Financial Summary - The projected revenue for China Railway is expected to grow from RMB 1,263.5 billion in 2023 to RMB 1,753.2 billion by 2026, reflecting a growth rate of 11.3% [3]. - The net profit attributable to shareholders is forecasted to increase from RMB 33.5 billion in 2023 to RMB 45.7 billion by 2026, with a growth rate of 10.1% [3]. - The earnings per share (EPS) is expected to rise from RMB 1.35 in 2023 to RMB 1.85 by 2026 [3].