Core recommendation logic: Currently, the company's largest shareholder, SDIC Hi-Tech, accounts for 20.29% of shares. The second largest shareholder, Haidian State Investment, accounts for 12.59% of the shares. A central enterprise background can help enhance the company's competitiveness and reduce financing costs. The company provides operation and maintenance services for the entire industry chain in the railway aftermarket, from equipment supply, operation and maintenance to operation. Future performance is expected to improve rapidly. According to the equity incentive plan announced on May 30, 2019, the assessment target is that the net profit for 2020-2022 is not less than 590 million, 750 million and 1.01 billion dollars, and the 2022 net profit target is 210% higher than 2018. Macro background: Underpinned by infrastructure, rail transit has a lot of room for investment The rail transit industry is picking up: first, rail transit is a good tool for steady growth, and it also relieves traffic pressure, improves the commuting efficiency of the whole society, and reduces pollution emissions; second, investment in fixed assets was weak in the first half of the year, while the Politburo meeting of the Central Committee clearly stated that “housing is not a problem”, investment in manufacturing and infrastructure will pick up, while in terms of infrastructure, there is already a surplus of highways. There is still plenty of room for rail transit, especially urban rail. Industry pattern: The stock market space is broad, and intelligent maintenance is the core industry model, and the huge stock of vehicles and road sections makes maintenance and repair the focus of future attention. We expect the overall operation and maintenance market to be about 207.7 billion yuan per year. In 2018, the number of vehicles operated by urban rail transit was 3,012, the number of railway locomotives owned nationwide was 21,000, the number of railway buses and trucks owned nationwide was 72,000 and 830,000, respectively, and 2,6048 EMUs. Line operation and maintenance will become the core industry model for the post-rail transit market. Company advantage: After the central enterprise holds, implementing a full-line operation and maintenance model will greatly improve the company's performance. SDIC Hi-Tech paid 2,987 billion yuan on November 10, 2018 to complete the tender acquisition and become the company's largest shareholder. The central enterprise background has greatly enhanced the company's competitiveness, and the interest rate on long-term credit loans has been reduced to 5.7%. The Shenzhou High Speed Rail explores the “operation+N” value-added profit model for operation and maintenance services. Projects such as Taizhou Municipal Railway Line S1, Hangzhou-Shaotai High Speed Rail, and Tianjin Metro Line 7 have been laid out to obtain stable excess cash flow and revenue. In the first half of 2019, the company's on-hand orders reached a record high, signing new contracts of 1.33 billion yuan, an increase of 85% over the previous year. Investment recommendations We estimate that from 2019 to 2021, the company's net profit attributable to shareholders of the parent company will be 4.85, 5.99, and 754 million yuan, respectively, and the corresponding PE will be 20, 16, and 13 times, giving it a “recommended” rating. Risk warning: New orders fall short of expectations, repayment cycles are too long, and goodwill holdings are at risk.