2024 results in line; 1Q25 results miss our forecast

Beijing-Shanghai High Speed Railway announced its 2024 results: Revenue rose 3.6% YoY to Rmb42.16bn and attributable net profit rose 10.6% YoY to Rmb12.77bn, in line with our and market expectations. 1Q25 results: Revenue rose 1.2% YoY to Rmb10.22bn and attributable net profit stayed largely flat YoY at Rmb2.96bn, missing our expectations, which we attribute to weak revenue growth, weak demand from long-haul passengers, and diversion of business passengers from airlines.

Trends to watch Passenger volume grew steadily in 2024; growth likely slowed in

1Q25. In 2024, the number of passengers transported by Beijing- Shanghai high-speed railway reached 52.02mn, down 2.4% YoY. Railway network service turnover reached 102.52mn train km (+11.4% YoY). The rail mileage of Jingfu-Anhui railway reached 37.63mn train km (+5.7% YoY). The steady increase in business volume boosted revenue by 3.6%.

In 1Q25, revenue growth was weak, as passenger traffic of Beijing- Shanghai high-speed railway likely remained flat, and turnover of railway network service likely recorded low single-digit growth.

Financial expenses continued to fall, unleashing profit potential. The

firm’s financial expenses fell 24.4% YoY to Rmb1.79bn in 2024 and 18.9% YoY in 1Q25 to Rmb0.39bn, mainly because: 1) The firm continued to repay debts, reducing its net debt by about Rmb11.4bn in 2024, and by about Rmb3bn in 1Q25 compared with end-2024; 2) the interest rate of the firm’s debt declined, and we estimate the interest rate of its average interest-bearing liabilities dropped about 30bps YoY in 2024.

The firm had ample cash flow, with a dividend payout ratio of about

46% in 2024. Operating cash flow reached Rmb20.07bn and free cash flow was Rmb18.9bn in 2024, which was ample. The firm announced a dividend of Rmb5.78bn (implying a DPS of Rmb0.118), and the firm repurchased Rmb44mn of shares in 2024, totaling Rmb5.83bn in shareholder returns, accounting for about 46% of the net profit attributable to shareholders.

Financials and valuation

Although financial costs still have downside potential this year, we lower our 2025 earnings forecast 8.3% to Rmb13.07bn (+2.4% YoY), given weak business growth since the beginning of 1Q25. We introduce our 2026 earnings forecast at Rmb13.83bn (+5.8% YoY). The firm is trading at 22.0x and 20.8x 2025e and 2026e P/E. Given market preference for the company’s strong cash flow and increased exposure to ETF funds, we maintain an OUTPERFORM rating and TP of Rmb6.14, implying 23.1x and 21.8x 2025e and 2026e P/E, offering 5.0% upside.

Risks

Sharp rise in management fees for entrusted transportation; sharp rise in energy expenses; disappointing passenger traffic.