Net profit from 24H1 increased 21.4% year on year, and CRRC 2024H1 achieved operating income of 90.04 billion yuan, up 3.1% year on year; net profit to mother of 4.2 billion yuan, up 21.4% year on year. 24H1's comprehensive gross margin was 21.4%, up 0.3 percentage points year on year; net margin was 6.1%, up 0.9 percentage points year on year.

The railway equipment business saw a high increase in revenue, with outstanding performance in the train and bus business. 2024H1's railway equipment business achieved revenue of 41.985 billion yuan, an increase of 47.0% year on year. Among them, locomotive/bus/EMU/truck revenue was 81.42/2.634/26.527/4.682 billion yuan, respectively, with year-on-year changes of -14.1%/+108.6%/+93.2%/+14.6%. Revenue from the urban rail and urban infrastructure business was 16.375 billion yuan, down 14.1% year on year, mainly due to a decrease in revenue from urban rail projects; revenue from the new industry business was 30.042 billion yuan, down 18.5% year on year, mainly due to a decrease in revenue from wind power and energy storage equipment; and revenue from the modern service business was 1.638 billion yuan, down 42.3% year on year, mainly due to a decrease in the scale of logistics and financial leasing business in the current period.

EMUs have entered the advanced repair cycle, and the company is expected to benefit from increased demand for maintenance services and equipment updates. According to the China Railway Group Bidding Network, the two Level 5 repair tenders announced in 2024 have already been tendered for a total of 509 groups, an increase of 371.3% over the total number of Level 5 repair tenders in 2023. According to the contract announcement issued by the company, the total amount of advanced EMU maintenance contracts in 2024 has reached 28.46 billion yuan, an increase of 99.3% compared with the total amount of 14.28 billion yuan of advanced maintenance contracts announced in 2023. We believe that demand for post-cycle EMU maintenance will continue to increase in the future. In particular, demand for advanced repairs represented by Level 5 repairs will grow rapidly, and the company, as a leading rail transit equipment company, will benefit significantly.

On February 28, 2024, Fei Dongbin, director of the State Railway Administration, proposed vigorously promoting the application of new energy railway equipment, formulating emission standards and management measures for internal combustion locomotives, improving the renewal subsidy policy, speeding up the promotion and application of new energy locomotives, and striving to achieve basic elimination of old internal combustion locomotives by 2027. Old internal combustion locomotives are expected to be upgraded on a large scale, and the company's locomotive business is expected to benefit.

Orders continue to grow, and new product development continues to be implemented

2024H1 signed a new order of 140.1 billion yuan, up 3.24% year over year. 2024H1 successfully signed a contract for the Indonesian National Railway commuter train project; the first Hungarian high-speed rail train was unveiled in the Zemun section of Belgrade, Serbia; and the TIC project in Sao Paulo, Brazil was implemented. The company continues to achieve results in the development of new products. The world's first carbon fiber subway train for commercial operation was officially released; a new generation smart intercity (city C type) EMU was officially released; an upgraded version of the CR400 Fuxing smart EMU technology was launched; and the first new intelligent heavy-duty electric locomotive in China was officially launched.

Maintain an “increase in holdings” rating

The company's performance is growing steadily, orders are full, and it will continue to benefit from increased demand for rail transit equipment updates and maintenance in the future. We maintain the 24-26 net profit forecast of 13.5/15.02/16.35 billion yuan, corresponding EPS of 0.47/0.52/0.57 yuan, maintaining the company's A share and H share “gain” ratings.

Risk warning: risk of changes in industry policies, risk of product price reduction, risk of poor new business development