The performance declined in the first half of the year, but the net profit in the second quarter increased compared with the same period last year. CRRC Corporation achieved operating income of 81.3 billion yuan in the first half of 2022, down 14.8% from the same period last year; net profit from home was 3.13 billion yuan, down 21.5% from the same period last year; and earnings per share was 0.11 yuan. The comprehensive gross profit margin was 20.1%, down 0.9 percentage points from the same period last year; the net profit margin was 5.0%, down 0.1 percentage points from the same period last year. The company's operating situation improved in the second quarter, and 22Q2 realized a net profit of 2.91 billion yuan, an increase of 9.9 percent over the same period last year.

The railway equipment business is under pressure affected by the epidemic.

In the first half of 2022, the company's railway equipment business achieved operating income of 25.06 billion yuan, down 33.6% from the same period last year. Among them, the income of locomotives / passenger cars / emus / trucks was 83.5 billion yuan, 11.4 pounds, respectively, and the year-on-year change was + 68.3 percent, 63.8 percent, 74.3 percent, 262.9 percent. The income from urban rail and urban infrastructure business was 21.81 billion yuan, down 4.4% from the same period last year; the business income from new industries was 30.45 billion yuan, down 3.2% from the same period last year; and the income from modern service business was 3.98 billion yuan, up 15.1% from the same period last year.

Technology research and development continues to advance, and new products continue to be introduced to the market.

In the first half of the year, the company's speed of 160 km / h to 350 km / h "Fuxing" series EMU was fully put into operation; 600 km / h high-speed maglev, 400 km / h variable gauge transnational interconnection high-speed EMU, 350 km / h freight train set, the first Chinese standard subway train have been offline; Jingzhang, Jingxiong, Beijing-Shanghai intelligent EMU, plateau dual-source EMU, plateau electric locomotives have been put into operation one after another. The overall technology of rail transit equipment such as high-power locomotives, heavy-haul railway freight cars and urban rail vehicles has reached the international leading level.

Newly signed orders increased rapidly compared with the same period last year, and overseas layout was further optimized.

In the first half of 2022, the company signed 130.9 billion yuan in new orders, an increase of 37.9 percent over the same period last year, of which 17.3 billion yuan was newly signed overseas orders, an increase of 16.1 percent over the same period last year. The company has continuously ploughed the markets of countries along the "Belt and Road Initiative" route and won new orders for rail transit equipment in Tanzania, Turkmenistan, Australia, New Zealand, Brazil, Argentina and other countries and regions. Foslow, a merger and acquisition enterprise, signed a locomotive sales contract with Deutsche Railway Freight Co., Ltd., the export business of new materials and wind power equipment has been steadily improved, and the overseas business structure and market layout have been further optimized.

Maintain the "overweight" rating

Due to the epidemic situation and other factors, the bidding of the National Railway Group has been delayed, which has an impact on the performance. We subsequently lowered the company's 22-24 return net profit forecast of 15.2% 12.2% to 92.6%, and the EPS for 22-24 was 0.32, 0.37 and 0.41 respectively. During the 14th five-year Plan period, the overall investment pattern of the rail transit industry is expected to remain sound, and the company's newly signed orders are expected to pick up obviously, which is expected to bring about a bottom rebound and maintain the company's A-share and H-share "overweight" rating.

Risk hints: industry policy change risk, product price reduction risk, new business development risk