Analyst Note| Jennifer Song |
We lower our fair value estimate of Guangshen Railway to HKD 3.60 per share from HKD 3.80, to reflect a prolonged pandemic impact. We expect the government’s “stay locally” during Lunar New Year policy to hold back the travel demand temporarily, and we extend our net loss estimate for first-quarter 2020. Guangshen has recently started to sell “no seat” ticket recently, which we view is a positive sign indicating rising demand. We expect full-year passenger traffic to recover to 65% of the prepandemic 2019 level. This is 5% lower compared with our previous assumption, and we cut our full-year 2021 net profit forecast to CNY 129 million from CNY 281 million, while maintaining our view for a full recovery of passenger traffic to prepandemic levels by 2023.