China Railway's initial tender for advanced EMU repair reached 361 groups in '24, of which 207 were grade 5 repair groups, accounting for 57% (290 in '23, of which 108 were grade 5); subsequently, with the acceleration of equipment replacement, EMU maintenance volume, and the increase in tenders and deliveries of new locomotives, the rail transit industry may welcome a new round of growth opportunities.
The Zhitong Finance App learned that Southwest Securities released a research report saying that currently railway-related equipment is in a replacement cycle of about 10 years, according to relevant regulations, in line with the pace proposed by the Central Committee on Finance and Economics meeting to promote large-scale equipment updates, and the railway industry has proposed to basically eliminate old internal combustion locomotives by 27 years, and the tendering and procurement of related equipment updates will be accelerated; China's EMU began tendering around 2007, and the 2013-2017 peak bidding period. According to EMU repair level 5, it has entered a critical upward stage: China Railway 24 There were 361 groups, of which 207 were grade 5 repair groups, accounting for 57% (290 in 23 years, of which level 5 repair groups were 108); subsequently, with the acceleration of equipment replacement, EMU maintenance volume, and the increase in tenders and deliveries of new locomotives, the rail transit industry may welcome a new round of growth opportunities.
The main views of Southwest Securities are as follows:
China Railway opened its first tender for the Fuxing in '24, with an amount of about 30 billion yuan. The tender volume exceeded expectations, and equipment investment continued to heat up.
On May 11, China Railway issued an announcement to open the first tender for 24-year locomotives, with a speed of 350 kilometers per hour for the Fuxing intelligent train (8 groups); the 350 km per hour Fuxing intelligent configuration EMU (8 groups) and the 350 km per hour Fuxing intelligent configuration EMU (group of 17 cars), 132 groups, 13 groups, and 20 groups (10 trains), totaling 165 standard groups. Based on the price of the single-train Fuxing high-speed train, the total tender amount is about 30 billion yuan. The volume exceeded expectations, making it the highest speed of the year since 2017 This was the first largest EMU tender, and was second only to the 182 EMU tenders in October 2018, surpassing the number of 350 km/h EMU tenders in the calendar year 2019-2023.
Railway capacity has continued to increase since 23 years. Since 24M3, the country's railway fixed asset investment has jumped rapidly. 24M4 rail transit investment was +11.7% year-on-year, benefiting rail transit equipment manufacturers.
In 23, railways significantly boosted domestic demand. The annual railway passenger traffic volume was 3.68 billion people (+129%), and completed fixed asset investment of 764.5 billion yuan, +7.5% year on year; 24M1-M4 national railways completed fixed asset investment of 184.9 billion yuan, +10.5% year-on-year, excluding the impact of the Spring Festival on January-February average, March alone, and April respectively. The gradual increase in single-month investment has played an effective role in driving investment in the whole society. 24Q1 completed passenger traffic of 1,014 million passengers, +28.5% over the same period, and completed freight volume of 1,241 million tons, which remained flat at a high level; following the advent of peak travel such as summer travel and eleven+ “transit rail” and “road to rail”, railway capacity is expected to continue to increase, stimulating the accelerated release of investment in related equipment.
The 24Q1 multi-standard performance exceeded expectations, and China Railway Group's operating performance continued to be steady and improving, confirming the high demand for rail transit and the upward trend in the industry.
In 24Q1, 37 listed rail transit companies were analyzed. Of these, 21 companies achieved positive net profit growth, 6 with a growth rate of more than 50%, and 10 with a growth rate of more than 30%; among them, China CRRC's net profit of major vehicle or parts suppliers was +64%, Huihuang Technology's net profit to mother +239%, and the net profit of Shenzhou High Speed Rail was +42%; and the 24Q1 China Railway Group achieved revenue of 283.3 billion yuan, +4.2% over the same period. The business performance continued to heat up.
China Railway's goal for 24 years: complete passenger traffic volume of 3.86 billion people (+5%), delivery volume of goods of more than 1,000 kilometers, total transportation revenue of 1 trillion yuan, year-on-year increase of 35.9 billion yuan, an increase of 3.7%. Currently, China Railway targets, investment side, industry quarterly reports, industry tenders, etc. form logical verification, and the logic of high industry prosperity, continuous increase in capacity, and continuous increase in investment amount continues to be implemented.
Benefiting from relevant targets: Focus on recommending Mind Control (603508.SH), CRRC (601766.SH), China Express (688009.SH), etc. Other related core component manufacturers such as Era Electric (688187.SH), Huihuang Technology (002296.SZ), Xianghe Industrial (603500.SH), and Coney Electromechanical (603111.SH).
Risk warning: rail transit investment falls short of expectations, railway equipment tenders fall short of expectations, risk of industry policy changes.