Events: In the first three quarters of 23 years, the company achieved operating income of 675 million yuan, +8.21%; net profit of 33 million yuan, +32.41%; in the third quarter, the company achieved operating income of 258 million yuan, +17.27%; net profit of 6.93 million yuan, +30.92% year-on-year.

The company's performance improved marginally, and railway investment remained at a high level. In the first three quarters, the company achieved operating income of 675 million yuan, +8.21%; net profit of 33 million yuan, +32.41%; in the third quarter, the company achieved operating income of 258 million yuan, +17.27%; and net profit of 6.93 million yuan, +30.92% year-on-year. The company's development expenditure was RMB 31,8374 million, up 131.75% year on year, and monetary capital decreased by 34.65% year over year during the reporting period. This was due to the increase in tax payments due to the “phased tax deferment policy”, foreign investment and fixed asset purchases due to payment of taxes due to the “phased tax deferment policy”.

On August 25, the company deliberated and passed the “Proposal on the Plan to Repurchase Company Shares”. The maximum transaction price for the repurchase of shares was 6.45 yuan/share, the minimum transaction price was 6.39 yuan/share, and the total transaction amount was 3,718,111.00 yuan (excluding transaction fees). In the first three quarters of the year 23, China's railways completed a total of 508.9 billion yuan in fixed assets, an increase of 7.1% over the previous year, and put into operation 1,402 kilometers of new lines, including 1,276 kilometers of high-speed rail.

The railway 5G-R test band was officially approved, officially sounding the trumpet for railway 5G construction. On October 9, the Ministry of Industry and Information Technology approved the 5G-R test frequency for a new generation of railway mobile communication systems based on 5G to support field technology experiments for 5G-R systems. The approval of the current 5G-R test frequency will rapidly promote the evolution of next-generation mobile communication technology and equipment development for railways. After the 5G-R test frequency is approved, future railway systems still need to further move from a “test ground” to an “arena”, from an “ivory tower” to an “application field”, and carry out full testing, verification and application demonstration on high-speed railways, plateau railways, alpine railways, and heavy-duty railways. The company has taken the lead in developing key technology products such as 5G-R interface monitoring systems, 5G-R dual-mode terminals, etc., and actively innovating application solutions for railway industry, based on years of accumulation of railway-specific communication technology, etc.。 In August of this year, the company took the lead and co-authored the “White Paper on Application of Railway 5G-R Visual Technology” with institutions such as Beijing Jiaotong University and the Fourth Railway Institute. The company will benefit from increased demand for the 5G-R upgrade.

A “Comprehensive Cooperation Agreement” was signed with Huawei to embrace the intelligent upgrading of railways. On November 28, the company and Huawei Technologies Co., Ltd. signed a “Comprehensive Cooperation Agreement” at the headquarters of Huawei in Shenzhen. This cooperation agreement marks that the two sides will target vertical industries such as railways, urban rail transit, and civil aviation. Based on core key fields such as artificial intelligence, 5G, safety and reliability, etc., the two sides will carry out comprehensive strategic ecological cooperation in technology research and development, market expansion, and industry co-construction, explore more efficient and intelligent industry solutions, and jointly accelerate smart transportation construction. Currently, China's transportation industry is in a critical period of overall acceleration of digital and intelligent construction. In September of this year, China National Railway Group Co., Ltd. issued the “Digital Railway Plan”, which proposes that the digital transformation of China's railways will be fully completed by 2035. The company has accumulated rich practical experience and diversified product lines and solutions in the fields of dispatch and command, integrated operation and maintenance, security monitoring, and informatization construction. After signing this agreement, the two sides will carry out comprehensive cooperation in the fields of communication and information technology. The company will join the Huawei ecosystem, be deeply tied to the Huawei technology route, and develop safe and reliable products and solutions for vertical industries based on basic information technology and equipment such as operating systems (Hongmeng, Euler), servers (Kunpeng, Shengteng), 5G, cloud computing, and big models.

Investment advice: The company is on the 5G-R railway boom track, and we believe the company will maintain long-term growth. It is predicted that the company's revenue for 2023-2025 was 1,270/ 14.25/ 16.37 billion yuan, up 10.9%/12.2%/14.9% year on year. The company's net profit was 0.87/ 1.19/164 billion yuan, respectively, up 40.1%/36.4%/37.8% year on year, corresponding to EPS 0.15/0.20/0.28 yuan, PE 55.1/40.4/29.3; first coverage, giving it an “increased holdings-B” rating.

Risk warning: 5G-R technology development falls short of expectations; market expansion falls short of expectations; product competition intensifies; and receivables collection is not timely.