The domestic market for control systems has entered a cycle of renewal and upgrading, and there is considerable space in overseas markets.

According to the “14th Five-Year Plan” target, railways will add 19,000 kilometers during this period, and the total control system market size will be about 507.3 to 93.48 billion yuan; given that the operating mileage of urban rail is already close to the target of 10,000 kilometers by the end of 2022, the urban rail control system market will far exceed 78.88 billion yuan during the 14th Five-Year Plan period.

In the railway sector, the control system upgrade cycles for high-speed railways and general speed railways are about 10 years and 15 years, respectively. It is estimated that from 2024 to 2025, demand for general railway and high-speed rail control system upgrades will resonate with a market of 280.47 to 32.452 billion yuan.

It is estimated that the total investment in railway infrastructure in the world over a total of 21 years from 2020 to 2040, excluding China, will reach a total of US$5137 billion.

Among them, with the exception of China, Europe will be the largest sector for future railway infrastructure investment, accounting for 47% of the global scale.

Leading rail transit control system, domestic and foreign business go hand in hand.

The company led the development of China's rail transit control industry and contributed to many technological product breakthroughs. The company has a leading market share in a number of core train control technologies and equipment. Among them, the company has the largest market share of CTCS-3 train control system equipment, accounting for more than 90% of the market share in the industry.

The company has a broad global presence and relies on the “Belt and Road” to expand overseas. All of the company's train control system products have obtained the global “pass” TSI certification, laying a solid foundation for supporting China's high-end train control equipment to “go global” with CTCS standards or ETCS standards.

Profit forecast:

Demand for railways and urban rail in the company's important terminal markets is gradually recovering. At the same time, the resonance of general rail and high-speed rail control systems renewal cycles will bring increase; as a leading domestic control system enterprise, the company continues to innovate in science and technology to lead the development of the industry; the company is actively developing and growing rapidly in overseas markets, which will lead to performance growth. Net profit for 2023-2025 is estimated to be 39.02, 40.93, and 4.321 billion yuan respectively, EPS is 0.37, 0.39, and 0.41 yuan, respectively, and the current stock price corresponding to PE is 13, 12, and 12 times, respectively. Maintain a “buy” rating.

Risk warning

Overseas business risks brought about by changes in the pattern of international relations;

National railway infrastructure investment falls short of anticipated risks;

Investment in urban rail transit falls short of anticipated risks.