CRRC: A global leader in rail transit equipment. The diversified layout of the future industry will adhere to the strategic positioning of “one core, two businesses, first class” and the “one core, three poles, multiple points” business structure, and comprehensively create a new pattern of “double track, double cluster” industry development for rail transit equipment and clean energy equipment.
Rail transit equipment: the cycle is approaching, policy support
Policy plan: Multiple departments have spoken out frequently, and the China Railway Administration, in collaboration with multiple departments, issued the “Implementation Plan for Promoting Low-Carbon Development in the Railway Industry”, which proposes a clear goal of achieving a railway electrification rate of at least 78% by 2030 and striving to reach 70% or more of the share of electric locomotives.
Capital expenditure: National railways completed fixed asset investment of 764.5 billion yuan in 23, +7.5% year-on-year; net profit of 12.1 billion yuan was achieved in 23, which is expected to drive the recovery of railway investment; according to the “Medium- and Long-Term Railway Network Development Plan”, the operating mileage of high-speed rail will need to be increased by about 5,000 kilometers in 2024-25.
Renewal and replacement: China's EMU trains and subway cars all began to be deployed at an accelerated pace in 2014. As EMU ownership grows and service life increases, demand for advanced EMU repair business may increase, thus driving the need for maintenance and replacement in the high-speed rail equipment industry.
According to China Railway Group's official website and CRRC's announcement, we estimate that under the average locomotive price of 30 million yuan +50% replacement rate, the replacement market for old fuel vehicles is about 117 billion yuan.
Urban rail market: A total construction investment of 521.43 billion yuan was completed in 23 years. The China Urban Rail Transit Association expects new lines to be put into operation in the next 24-25 years, which is basically the same as in 23; RT Rail Transit expects the total number of tenders for urban rail vehicles to be 61.85 billion yuan in 2024.
Logical focus: Release of maintenance cycle demand, broad international market space, release of advanced repair demand: In 2024, a total of about 360 EMU advanced repair procurement projects were tendered. According to the number and caliber of EMUs, level 5 repairs accounted for 57.4%; CRRC signed advanced maintenance contracts with China Railway Group for a total of about 14.78 billion yuan from December 2023 to March 2024.
Adhere to the global layout: CRRC adheres to the path of internationalization, and Yawan High Speed Rail achieved China's first high-speed train export order, marking the first time that China's high-speed rail system, all elements, and the entire industry chain have been launched overseas; new overseas orders in 2023 reached the highest overseas contract value in nearly 7 years.
High dividend dividend assets: The company's dividend rate showed a fluctuating upward trend in 2018-2023, and the dividend rate also increased from 36.5% in 2019 to 49% in 2023, focusing on shareholder returns.
Profit forecast: We expect the company to achieve net profit of 126.8/140.3/16.54 billion yuan in 2024-2026, respectively, and the corresponding PE is 16.04X/14.50X/12.30X respectively, giving a “holding” rating!
Risk warning: strategic risk, market risk, exchange rate risk, overseas operation risk, primary observation risk, etc.