Guotai Junan released a research report stating that it gave CRRC (01766) an “additional” rating. The estimated net profit for 2023-2025 is 122.10/137.19/15.235 billion yuan, corresponding EPS is 0.43/0.48/0.53 yuan, and the target price is HK$7.59. The company is a global leader in rail transit equipment. The “Large-scale Equipment Renewal Plan” accelerates the construction and renewal of the rail transit industry, is optimistic about the company's future performance growth, and drives improved profitability.
Guotai Junan's main views are as follows:
The “Large-scale Equipment Renewal Plan” promotes the development of the industry, and rail transit leaders are expected to benefit deeply.
On March 7, 2024, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”. The document mentions that by 2027, the scale of equipment investment in industry, agriculture, construction, transportation, medical care and other fields will increase by more than 25% compared to 2023; the energy efficiency of major energy equipment in key industries has basically reached the energy saving level, and the proportion of production capacity with environmental performance reaching Class A level has increased dramatically. Policy incentives are expected to accelerate the pace of rail transit equipment renewal, and CRRC, the rail transit leader, is expected to achieve long-term steady revenue growth in the railway equipment business.
The rail transit industry cycle will drive a boost in demand, and the industry will usher in a larger space for renewal and replacement.
1) Passenger traffic volume recovered markedly in 2023. The annual railway passenger traffic volume rose 130% year on year, and it is expected that railway passenger transportation demand will continue to be released; 2) Railway investment has entered the recovery stage. According to the main indicators of “14th Five-Year Plan” transportation development, railway mileage will reach 165,000 kilometers in 2025, and future industry investment is expected to have strong momentum; 3) Demand for high EMU maintenance is about to be released rapidly. The company's high market share as the industry's leading market effectively supports future performance growth.
Rail transit leaders have obvious advantages, creating a new ecosystem for the production chain.
As a leading global rail transit equipment company, CRRC has a long and deep upstream and downstream industrial chain. It is a jewel formed by integrating many high-precision industries. With its advantages in its own industrial chain, the company continues to lay out R&D investment, and is expected to drive the company's performance to continue to grow.