Where did third-quarter performance slow?

  • In the third quarter of 2026, Beijing–Shanghai High-Speed Railway’s revenue was 11.807 billion yuan, up just 0.1% year on year, slowing from 3.9% revenue growth in the first half. Net profit was 3.945 billion yuan, down 1% year on year, broadly in line with Morgan Stanley’s expectations.
  • While revenue was broadly flat, third-quarter cost of sales rose 5.1% year on year and gross profit fell 4.8%. Operating margin declined 0.5 percentage points to 45%, and net margin fell 0.4 percentage points to 34%.
  • Morgan Stanley believes the weak macroeconomic environment and competition from airlines weighed on profit growth. The bank estimates that Jingfu Anhui’s third-quarter profit was 99 million yuan, below 173 million yuan in the same period a year earlier.

What could drive a fourth-quarter improvement, and under what conditions?

  • Morgan Stanley expects Beijing–Shanghai High-Speed Railway’s profit growth to recover somewhat in the fourth quarter, given that airlines are raising fares during the off-season.
  • The bank’s reasoning is that the company’s costs are affected only to a limited extent by oil prices, while rising jet fuel prices could force airlines to raise fares, thereby easing the price competition faced by high-speed rail.
  • This assessment also depends on passenger traffic and fares: Morgan Stanley lists weaker-than-expected passenger traffic amid macroeconomic uncertainty, slower-than-expected capacity expansion, and especially lower-than-expected increases in short-haul fares as downside risks.

How are cash flow and full-year profit tracking?

  • Third-quarter operating cash flow rose 3.6% year on year to 6.3 billion yuan, while capital expenditure rose 77% year on year to 244 million yuan over the same period. Morgan Stanley values the company’s cash-generation ability and expects a forward free cash flow yield of about 8%.
  • Net profit for the first three quarters of 2026 was 10.716 billion yuan, up 4% year on year and equivalent to 76% of Morgan Stanley’s full-year forecast of 14.086 billion yuan. The net margin for the first three quarters was 32%.
  • Morgan Stanley rates the company Overweight, with a price target of 6.30 yuan; the closing price on 30 October 2026 listed in the report was 5.20 yuan.