National railway fixed asset investment increased by 10.5% year-on-year from January to July. Product structure, the operating income of 10-30 billion yuan products was 4.01/12.88/0.06 billion yuan respectively.
According to the research report by Haitong Securities, national railway fixed asset investment increased by 10.5% year-on-year from January to July. The railway's fixed asset investment has showed a continuous recovery, and the tender volume of EMUs is expected to grow. In addition, the landing and advancement of equipment renewal policies and accelerated overseas expansion are expected to benefit rail transit equipment.
Fixed asset investment: National railway fixed asset investment increased by 10.5% year-on-year from January to July, and the national railway fixed asset investment in July increased by 9.79% year-on-year. According to the official WeChat account of China Railway and Wind, the national railway completed fixed asset investment of 410.2 billion yuan from January to July 2024, an increase of 10.5% year-on-year. Fixed asset investment in July was 72.9 billion yuan, an increase of 9.79% year-on-year.
Passenger traffic: During the peak travel season, the national railway has sent more than 500 million passengers from July 1st to August 6th. According to the official WeChat account of China Railway, since the start of the peak travel season, the national railway has sent a total of 513 million passengers from July 1st to August 6th, an increase of 5.4% year-on-year, with an average of 13.86 million passengers sent daily.
Key policies: The Third Plenary Session of the 18th CPC Central Committee issued a decision requiring the promotion of independent operations in the natural monopoly links and market-oriented reforms in the competitive links of industries such as railways. According to Xinhua News Agency, the Decision of the Central Committee of the Communist Party of China on Further Deepening Reform in All Respects and Advancing China's Modernization, which was issued on July 21st, requires deepening the reform of the comprehensive transportation system, promoting the reform of the railway system, promoting independent operations in the natural monopoly links and market-oriented reform in the competitive links for industries such as railways, and improving regulatory systems and mechanisms.
Key company information in the rail transit industry:
1) CRRC Corporation: Signed orders worth 45.99 billion yuan from June to July, including approximately 13.68 billion yuan for high-level EMU maintenance orders. According to the notice of signed contracts by the CRRC Corporation, from June to July 2024, the CRRC Corporation signed orders worth approximately 45.99 billion yuan, including high-level EMU maintenance orders of about 13.68 billion yuan, sales of EMUs of about 0.89 billion yuan, sales of power centralized EMUs of about 1.51 billion yuan, sales of freight cars of about 8.2 billion yuan, sales of locomotives of 7.02 billion yuan, locomotive repair of about 6.1 billion yuan, sales and maintenance of urban rail vehicles of about 7.53 billion yuan, and sales of wind power equipment of about 1.06 billion yuan. The total amount of the above-mentioned contracts accounts for about 19.6% of CRRC Corporation's revenue in 2023.
2) China Railway Signal & Communication Corporation: Recently won orders worth 1.473 billion yuan, accounting for about 3.98% of the company's revenue in 2023. According to the announcement of voluntary disclosure of important rail transit market project bids by China Railway Signal & Communication Corporation, the company recently won orders for two railway markets and three urban rail transit markets, with a total order amount of about 775 million yuan for railway markets and about 698 million yuan for urban rail transit markets. The total amount of the aforementioned bids is about 1.473 billion yuan, accounting for about 3.98% of China Railway Signal & Communication Corporation's revenue in 2023.
3) Times Electric: Achieved a net income of 1.507 billion yuan attributable to shareholders in H1 2024, a year-on-year increase of 30.56%. According to the voluntary disclosure announcement of performance forecast in H1 2024 by Times Electric, the company expects to achieve a net income attributable to shareholders of 1.507 billion yuan in H1 2024, a year-on-year increase of 30.56%, and a net income attributable to shareholders after deducting non-recurring gains or losses of 1.268 billion yuan, a year-on-year increase of 36.50%. The growth of the company's revenue in H1 2024 benefited from the increase in railway investment and passenger traffic recovery, the year-on-year increase in acceptance and delivery volume of rail transit products, and the increase in emerging equipment industries such as power semiconductor devices. The year-on-year growth of net income attributable to shareholders and net income attributable to shareholders after deducting non-recurring gains or losses mainly benefited from the year-on-year growth of revenue scale.
4) Henan Splendor Science & Technology: Revenue in H1 2024 increased by 48.53% year-on-year, and net income attributable to shareholders increased by 85.40% year-on-year. According to Henan Splendor Science & Technology's 2024 interim report, the company achieved revenue of 0.333 billion yuan and net income attributable to shareholders of 0.113 billion yuan in H1 2024, a year-on-year increase of 48.53% and 85.40%, respectively. The main reason for the increase in revenue is the increase in completed projects in H1 2024, and the main reason for the increase in net income attributable to shareholders is the increase in the proportion of high-gross margin items confirmed in the revenue recognition project.
5) Henan Splendor Science & Technology: In H1 2024, revenue grew 48.53% year-on-year, net income attributable to shareholders grew 85.40% year-on-year. According to the Henan Splendor Science & Technology 2024 semi-annual report, in H1 2024, the company achieved revenue of 0.333 billion yuan, a year-on-year increase of 48.53%, mainly due to the increase in completed projects in H1 2024; achieved net income attributable to shareholders of 0.113 billion yuan, a year-on-year increase of 85.40%, mainly due to the increase in revenue in H1 2024 and the increase in the proportion of high gross margin projects in recognized revenue projects.
Investment advice: Haitong Securities believes that the completion of fixed asset investment in the national railways continues to recover, and the bidding volume for high-speed trains is expected to increase. In addition, with the landing and promotion of equipment renewal policies and accelerated expansion overseas, rail transit equipment is expected to benefit. It is recommended to pay attention to CRRC Corporation, China Railway Signal & Communication Corporation, Times Electric, and China Railway Hi-Tech Industry Corporation.
Risk warning: Fixed asset investment in railways is lower than expected; policy promotion is lower than expected; and the company's order delivery is lower than expected.