Matters: According to a report on the website of the Ordnance Industry Group, the CJ-1 EMU axle test manufactured by the Jinxi axle successfully passed the review at the China Railway Corporation recently held a trial review meeting for the autonomous 250 km/h EMU axle. It is expected that the conditions for loading and operation will be ready in early May. The axles tested by the company will be loaded and put into trial operation on the Shanghai-Kunming Railway.
Ping An's point of view:
If all goes well, the company's EMU hollow shafts may be delivered in batches within the year. It is expected that the gross margin of hollow shafts far exceeds that of solid shafts, and the company will independently replace key components of EMUs. Meanwhile, China Railway placed an urgent order for 5,000 C80 trucks, and the tender for 20,000 company-owned vehicles is imminent, and the company is about to face a production contest.
EMU hollow shafts may be delivered in batches within the year. Previously, the solid axles of Jinxi axles were already equipped in small quantities on domestic EMUs of 200 km/h. The price was 7,000-9,000 yuan/piece, with a gross profit margin of 18%-19%. Currently, the unit price of hollow shafts produced by the joint venture Zhiqi Equipment for EMUs over 300 km/h has reached 440,000 yuan/unit. Assuming that the 2014-2015 China Railway Corporation tenders for 500 train trains (standard column), corresponding to 4,000 car bodies. If half of these were 250-kilometer EMUs, the requirement for 4 axles per vehicle would be about 8,000. If 300-kilometer EMU hollow shafts are localized in the future, Jinxi axles will face a historic inflection point in their performance.
Potential China Railway C80 and private car orders are expected to boost performance. Recently, China Railway Corporation urgently summoned various truck companies and requested that 3,000 C80 trucks be delivered by the end of May, and delivery time for 2,000 C80 cars is yet to be determined. Due to the tight delivery time this time, a special model was adopted where design plans, technical indicators, parts preparation, etc. were carried out simultaneously. A total of 5,000 vehicles are compatible with 20,000 axles. This time, the axles require 45 chromium-vanadium alloy steel, which is much higher than that of ordinary 50-type steel. This order will greatly boost the company's performance. In addition, Jinxi Axle is also expected to receive a partial order for 5,000 C80 vehicles. Bidding for company-owned cars is about to begin this year, and the number is expected to reach 20,000 vehicles, a record high after 2011. Jinxi axles are expected to receive some orders.
The majority shareholders' overall listing expectations are heating up. Jinxi Industrial Group, the majority shareholder of Jinxi Axles, is a key rocket development base under the Ordnance Industry Group. The revenue target of Jinxi Group in 2015 is 16 billion yuan, and the revenue target for 2011-2015 is an average annual increase of 41%. Currently, the range, accuracy, and strategic position of the new rockets have all been greatly improved, and demand for military exercises and foreign trade exports is growing rapidly. Currently, the Ordnance Industry Group has responded positively to the country's call and is planning a new round of state-owned enterprise reform and asset restructuring. It is expected that Jinxi axles may become a platform for asset injection for major shareholders in the future.
Give it a “Highly Recommended” rating. We are very optimistic about Jinxi axle's leading position in the railway equipment segment. The product structure of complete trucks+ordinary axles+EMU hollow shafts will keep the company oligopoly in market competition. The company's 2013-2015 EPS is expected to be 0.47, 0.62, and 0.77 yuan, giving the company a “highly recommended” rating, with a target price of 18 yuan.
Risk warning: Railway truck tenders fall short of expectations.