20240429-国金证券-中国中车-601766.SH-一季度业绩高增_毛利率提升显著_4页_1mb

China Zhongche Financial Report 2024 Q1 Analysis Summary

Financial Performance

In Q1 2024, China Zhongche (stock code: 0519) reported revenue of RMB 321.83 billion (down 0.6% YoY), net profit attributable to shareholders of RMB 100.8 billion (+638.6% YoY), and net profit after deduction of non-recurring items of RMB 66.8 billion (+228.08% YoY), demonstrating significantly improved operational performance. The company achieved remarkable profitability, with gross margin rising to 24.92% in Q1 2024, an improvement of 34.1 percentage points YoY and 19.6 percentage points QoQ.

Drivers of Growth

The performance boost is largely attributed to the 54.11% YoY increase in high-margin railway equipment business revenue. Additionally:

• Q1 2024 saw a substantial performance improvement in the company.
• High-margin railway equipment business revenue increased by 54.11% YoY, driving overall profitability up significantly.

Market Outlook and Opportunities

The company anticipates continued growth in rail traffic equipment demand driven by:

• Ongoing railway infrastructure investments (+75% YoY national fixed asset investment in 2023, +99% in Q1–Q3 2024.
• Recovery in passenger volumes (an increase of 130% to 38.6 billion in 2023, +285% YoY in Q1–Q3 2024).

Moreover, maintenance services, particularly the fifth-level maintenance program for EMUs, represent a key growth driver. 'Five-level maintenance', a major overhaul required after approximately 12 years or 480,000 kilometers of operation, is entering a growth phase. In 2024, orders for EMU maintenance exceeded 2023's full-year volume, with 361 high-level repair bids, including 207 fifth-level repairs, marking a significant increase from the previous year. During Jan-Mar 2024, the company secured RMB 147.8 billion of EMU maintenance contracts, highlighting strong demand for its services.

Valuation and Targets

The company projects revenue growth for 2024–2026 at CAGR, maintaining an A rating with targets:

Maintaining an "A (Buy)" recommendation due to strong prospects in railway modernization and EMU maintenance.

Risks

Potential risks include slower-than-expected railway investments, challenges in international expansion, uncertainties over new business initiatives, and currency fluctuations.

Market Sentiment

Market analysis favors the company, with an average investment score of 100 indicating a 'Buy' recommendation across multiple reports from September 2023 to April 2024.