Leading large-scale railway road maintenance machinery companies that have grown rapidly are leading enterprises in the large-scale railway road maintenance machinery industry, accounting for more than 80% of domestic sales; in the industry, they rank first in Asia and second in the world in terms of revenue. We believe that in addition to directly benefiting from the steady growth of the railway maintenance industry as a leader, the company has also continuously entered the field of large-scale railway road maintenance machinery product upgrades and import substitution through self-developed new products, and has joined hands with China Railway Construction to explore overseas markets. Driven by three rounds of growth, the company will achieve rapid growth during the 13th Five-Year Plan. The company has a clear competitive advantage in the road maintenance machinery industry. The entire investment cycle of the railway, which has grown rapidly with the industry, has successively covered infrastructure, equipment purchase, maintenance and replacement processes. In the context of total railway investment remaining steady, the investment structure is changing, and the post-cycle maintenance industry is still in a period of rapid growth. According to our estimates, by the end of the 13th Five-Year Plan, the domestic market capacity of large-scale railway road maintenance machinery will increase by about 70% compared to the end of the 12th Five-Year Plan, and drive the growth of the overhaul market. As a leading enterprise with a domestic market share of over 80%, the company will grow rapidly with the industry. According to the principle of “who manufactures, who maintains”, the company is also the biggest winner in the large-scale railway maintenance machinery overhaul market. Independent research and development of new products has replaced imports, and newly entered the urban subway field. As domestic railways move towards higher speed and heavy loads, demand for large-scale railway road maintenance machinery is constantly being upgraded. The new products developed by the company, such as contact network integrated maintenance vehicles, subway rail washers, snow plows, etc., adapt to the general trend of domestic import substitution; the new products developed continuously will bring new performance growth points to the company. In December 2015, the company consortium won the bid for a total of 22 JDZ-160 contact network maintenance work vehicles with a contract value of 528 million yuan. Furthermore, in 2015, the company won bids for the first time in the urban rail subway markets in Beijing and Shanghai, and the rapidly growing urban subway market will become a new growth point for the company outside of the national railway sector. The company is an important beneficiary of railway equipment going overseas under the “Belt and Road” strategy. Under the guidance of the “Belt and Road” strategy, China's high-speed rail is going overseas. As a subsidiary of China Railway Construction, the company is developing overseas markets with the Group. The company has proposed to raise the annual related transaction limit with China Railway Construction from around 100 million to 1 billion. It is expected that the company will receive overseas orders for the construction of Southeast Asian railways in recent years. Giving a “buy” rating, we expect the company's revenue in 2016-17 to be RMB 468/5.45 billion, net profit of RMB 55/ 660 million, and EPS of RMB 0.36/0.43 respectively. According to the DCF valuation, we gave the company a target price of HK$6.05, corresponding to 14 times PE in 2016, with a “buy” rating. Risk warning: industry investment falls short of expectations, poor overseas expansion, changes in partner relationships