Hong Kong Stock Concept Tracking | EMU New Bidding Exceeded Expectations Institutions Optimistic about the Revival of the Railway Equipment Industry Chain (with Concept Stocks)

On November 5th, the bidding announcement for the procurement project of the third batch of Fuxing Hao intelligent high-speed trains with a speed of 350 kilometers per hour in 2024 was released, involving 80 sets. The bidding announcement for the high-speed trains was released on November 5th, including 66 sets of 8-carriage common type, 10 sets of 8-carriage cold-resistant type, and 4 sets of 17-carriage common type Fuxing Hao intelligent high-speed trains, with a large scale. The acceleration of railway investment growth, continuous increase in passenger traffic, and higher than expected bidding volume for high-speed trains are expected to drive the company's long-term revenue growth in high-speed trains. Institutions believe that the high increase in the fifth level maintenance bidding for high-speed trains is promising for the growth of the high-speed train maintenance business. With policies encouraging equipment updates, the renewal of old locomotives is expected to accelerate. CRRC Corporation (01766): CRRC Corporation's performance steadily improved in the third quarter of 2024, with the revenue growth of the railway equipment sector leading the four major business sectors, including a significant increase of 87.34% in high-speed train revenue, driving profit levels. Looking forward to the full year and beyond in 2024, the company will benefit from both new markets and equipment upgrades. 1) New markets: Railway passenger traffic increased by 13.8% in the first three quarters of 2024, with the expectation of further bidding for high-speed trains by the end of the year to meet the demand of the Spring Festival travel rush. 2) Maintenance and refurbishment: Maintenance and refurbishment revenue in the first three quarters was approximately 30 billion yuan, representing a significant year-on-year increase; the high-level maintenance bidding for high-speed trains continues to exceed expectations, with a significant increase in the proportion of high-value fifth-level maintenance, expected to further drive profit levels. 3) Locomotive renewal: With the introduction of new energy locomotives, the phasing out and renewal of old locomotives is expected to gradually commence, laying the foundation for future development over the next three years. Zhuzhou CRRC Times Electric (03898): According to past data, the average cycle for maintenance and refurbishment of Harmony locomotives/high-speed trains is approximately 12 years. Harmony locomotives entered the C6 maintenance phase in 2019, with a gradual increase in production starting in 2022, reaching a peak in recent years; high-speed trains were put into operation in large quantities in 2010, and the first fifth-level maintenance began in 2020. Due to reforms in maintenance procedures and systems, the peak maintenance period has been delayed by nearly two years, with the company expecting to reach a relative peak in high-level maintenance from 2024 to 2027. As for the equipment renewal, the National Railway Administration proposed in February 2024 that old and obsolete internal combustion engines reaching the age limit will be phased out by 2027. With the improvement of replacement subsidy policies, institutions expect that this will bring income increments to Zhuzhou CRRC Times Electric. China Railway Signal & Communication Corporation (03969): As a leader in rail transit control systems, the company is expected to greatly benefit from the upgrading and renovation of rail transit lines. Currently, railway-related equipment is in a replacement cycle, consistent with the pace of large-scale equipment updates proposed at the meeting of the Central Finance and Economic Committee. Bidding and procurement for related equipment upgrades are expected to accelerate, and the subsequent demand for line upgrades (such as high-speed rail line upgrades, 2G to 5G private network upgrades in the railway domain, and signal system upgrades in the urban rail domain) are expected to accelerate. The company is the only enterprise in China that integrates the design, equipment, and construction of rail transit signal communication systems. In 2023, the company held a market share of over 60% in the high-speed rail weak electric integration business and over 37% in the urban rail signal system integration field, ranking first. The upcoming upgrading and renovation demand is expected to bring new flexibility to the company's business.