In the first half of 2022, the company achieved revenue of 81.3 billion yuan (year-on-year-14.8%) and return-to-mother net profit of 3.13 billion yuan (year-on-year-21.5%). Affected by the local epidemic in the country, at the same time, the bidding of the National Railway Group was delayed, resulting in a certain decline in the company's performance in the first half of the year. Performance is expected to be under pressure for the whole year. But on the whole, the company has a strong anti-risk ability, with the gradual easing of the local epidemic, the maintenance market and urban rail subway are expected to maintain beautiful growth, the prospect of new industry business is promising, and we maintain the "buy" rating.

The overall operation of the company is stable. (1) single 22Q2 revenue and profit: the revenue and return net profit of the company in a single quarter are 50.65 billion yuan and 2.91 billion yuan respectively, which are-6.1% and + 10% respectively compared with the same period last year, showing strong business resilience under the disturbance of the local epidemic. (2) gross profit margin: 22H1's overall gross profit margin is 20.1% (year-on-year-0.9pct), 22Q2 single-quarter gross profit margin is 19.8% (year-on-year, month-on-month respectively-1.0pct,-0.8pct). Overall, the company's gross profit margin remains stable. (3) expenses: 22H1, the company's sales, management and R & D expenses reached 2.54 billion, 5.24 billion and 4.53 billion yuan respectively, which were-22.2%,-11.9% and-11.0% respectively compared with the same period last year. The three expense rates were 3.1%, 12.0% and 5.6% respectively, and the overall expense rate remained stable compared with 21H1. (4) Cash flow: the cash flow of the company is good, the net cash flow of 22H1 operating activities is + 83.3% compared with the same period last year, and the index of "net cash flow / operating profit from operating activities" is 255.8% (20H1 and 21H1 are 145.2% and 7.6% respectively), which is significantly improved compared with the same period last year.

Sub-business segment: 2022H1, railway equipment / urban rail business / new industries / modern services respectively achieved revenue of 25.06 billion / 21.81 billion / 30.45 billion / 3.98 billion yuan, year-on-year-33.6% Lexus 4.4% Universe 3.2% Universe 15.1%, gross profit margin-2.0/-0.6/-0.3/-1.7pcts. (1) Railway equipment business: the revenue of locomotive / bus / EMU / train is 8.35 billion / 1.14 billion / 7.03 billion / 8.55 billion yuan respectively, which is mainly due to the decline of EMU business. (2) Urban rail business: the income of urban rail vehicles is 17.97 billion yuan, accounting for 82.4% of urban rail business.

(3) Modern service business: the revenue growth of this business is mainly caused by the growth of logistics business.

Outlook: on-hand orders are still abundant, optimistic about long-term development prospects. (1) order situation: 2022H1, the company continues to dig deep into the markets of the countries along the "Belt and Road Initiative", consolidate and expand the innovation achievements of overseas business models, and obtain new orders for rail transit equipment in Tanzania, Turkmenistan, Australia, New Zealand, Brazil, Argentina and other countries and regions. The company signed new orders of 130.9 billion yuan, an increase of 37.9% over the same period last year, of which 17.3 billion yuan was newly signed overseas orders, an increase of 16.1% over the same period last year. (2) Research and development: technological research and development continues to advance, and new products continue to be launched. The company has built an EMU product pedigree with fully independent intellectual property rights, and the series of "Fuxing" EMU with a speed of 160 km / h to 350 km / h has been fully put into operation; 600 km / h high-speed maglev, 400 km / h variable gauge transnational interconnection high-speed EMU, 350 km / h freight car unit and the first Chinese standard subway train have been offline. Jingzhang, Jingxiong, Beijing-Shanghai intelligent EMU, plateau dual-source EMU and plateau electric locomotives have been put into operation one after another, and the overall technology of rail transit equipment such as high-power locomotives, heavy-haul railway wagons and urban rail vehicles has reached the international leading level.

Risk factors: (1) China's EMU bidding and urban rail construction are not as expected; (2) the company's overseas order delivery is not as expected; (3) the company's new business development and overseas business expansion is not as expected; (4) the price of raw materials fluctuates greatly.

Investment suggestion: with the rapid development of domestic urban rail transit construction and the stock EMU gradually entering the high maintenance stage, the company's maintenance market and urban rail subway business are expected to maintain beautiful growth, and the prospect of new business is promising. We are optimistic about the company's long-term development prospects. Due to the repeated influence of the local epidemic situation in China this year, and the delay in the bidding of the National Railway Group, the company's performance is under some pressure. We have lowered the company's 2022-24 net profit forecast of 93.1 million RMB 10.77 billion RMB (the original forecast is 11.36 billion / 12.55 billion / 13.17 billion RMB). We take China Communications, Traffic Control Technology and time Electric, which are both railway industry chains, as comparable companies, whose 2023 Wind earnings are expected to correspond to an average PE of about 18 times. Considering that the company's growth is slightly lower than that of comparable companies, we value the company at 15 times PE in 2023, corresponding to the target price of 5.70 yuan, and maintain a "buy" rating.