Daqin Railway (601006): 18-year results are in line with expectations. 1Q19 is over-pessimistic expected results. Dividends will remain stable.

Daqin Railway (601006): 18-year results are in line with expectations. 1Q19 is over-pessimistic expected results. Dividends will remain stable.

2018 performance was basically in line with expectations; 1Q19 performance growth of 4% was better than we expected 2018 performance and dividends were in line with expectations: 2018 revenue of $ 78.3 billion, each time + 35%; net profit attributable to mothers was $ 14.5 billion, more than + 9%,Corresponds to EPS 0.

98 yuan.

The company’s 2018 dividend is 49 per second.

1%, the current 2018 dividend yield is 5.

7%.

The highest gross profit is + 14%, and the gross profit margin has dropped by 4 ppt (mainly due to changes in freight settlement methods for dilution).

The maximum capacity of the Daqin Line is +4 per year.

3%, the company’s total turnover for ten years + 8%.

Investment income of 3.1 billion US dollars (mainly from Shuohuang Railway), flat for many years; financial expenses -69% every six months (corresponding to the growth rate of 6 ppt profit), because the average balance of shareholders decreased.

Among them, 4Q revenue quarter + 7%, net profit + 4% year-on-year.

1Q19 results exceeded expectations: revenue of $ 19.7 billion, a year-on-year growth of 7%; net profit increased by 4% to 40 trillion per quarter, better than our expectations of -12% (we believe that changes in freight settlement methods caused 1Q18 net profit biasHigh 2Q18 low, will affect about 10ppt 1Q earnings growth).

Development trends The industry environment may drive the company to achieve growth in freight volume in 2019.

The 1Q traffic fluctuation was mainly because thermal power output was squeezed by hydropower (thermal power output increased + 2%, while hydropower benefited from a large increase in incoming water + 12%), and demand for thermal coal fell.

Looking ahead, the acceleration of traffic growth is expected to improve: (1) if the future growth rate of hydropower declines and the economy picks up, it will benefit thermal power; (2) reduce taxes and fees to the downstream, which is expected to boost demand; (3) the railway industryThe total delivery volume of 1Q is + 3% per year, which is lower than the target of + 6% of the annual work conference of Iron Total 2019.

As a national coal transportation platform, it is expected to continue to improve operating efficiency.

1) 杭州夜网论坛 The 18-year net profit of the newly acquired and consolidated Tang-Gang Railway has increased by 70%, contributing about 400 million yuan of net profit of Daqin.

The Tanggang Railway can help Daqin improve the control capacity of the connecting railways of the Bohai Rim ports, and at the same time reduce the traffic and performance risks brought by the future relocation of coal launch ports.

2) In 2018, sales / management / financial expenses increased by +3% / + 4% /-69%, slower than the growth rate of gross profit by 15%. The trend continued in the first quarter of 1919, and the separation of the three supply industries and the industry may be further controlled.cost.

Possible risks for the scale of operations after 2020: (1) Warri, Mengji and other lines may divert the Daqin line from 2020; (2) In the future, if the Daqin line is relocated, we expect each 100 million tons of Qinhuangdao port to be reducedLaunching coal will affect 4ppt annualized net profit growth.

The profit forecast is attributed to the higher-than-expected earnings of the Tanggang Railway. We raised the net profit forecast for mothers in 2019 by 2% to 14.9 billion yuan (ten years + 2%), and the net profit forecast for 2020 is 15.1 billion billion (percent + 2%).

Estimates and recommendations are currently sustainable 8.

4 times 19-year price-earnings ratio, 2019 dividend yield of 5.

9%.

Maintain recommended level and 10.

Target price of 12 yuan, corresponding to 10.

3 times 19-year price-earnings ratio, 21% upside.

Risk Macroeconomic growth is less than expected