Soochow Securities·2024-09-10 14:09Investment Rating - The report assigns a "Buy" rating for China CRRC Corporation Limited (601766) for the first time [1]. Core Views - China CRRC is positioned as a global leader in rail transit equipment, benefiting from the recovery of railway fixed asset investment. The company has shown a turnaround in its performance with a revenue increase of 5.08% year-on-year in 2023, reaching 234.26 billion yuan, and a net profit of 11.71 billion yuan, reflecting a growth of 0.50% year-on-year [3][4]. Summary by Relevant Sections Revenue and Profit Forecast - The forecast for total revenue from 2022 to 2026 shows a steady increase, with expected revenues of 260.70 billion yuan in 2024, 278.04 billion yuan in 2025, and 290.84 billion yuan in 2026. The net profit is projected to grow to 13.82 billion yuan in 2024, 15.32 billion yuan in 2025, and 16.23 billion yuan in 2026 [2][7]. Railway Equipment Business - The railway equipment segment is expected to benefit from the recovery in demand for high-speed trains and maintenance services. The company anticipates that the demand for high-level repairs will peak between 2024 and 2026, with significant growth in the number of repair orders [4][12]. The demand for new trains is also expected to rise, with projections of 270 new train sets to be tendered in both 2024 and 2025 [4][12]. New Industries - The new industries segment, which includes wind power equipment, power semiconductors, and new materials, is expected to grow significantly. The synergy between various subsidiaries is anticipated to enhance overall growth, with a focus on electric drive systems for new energy vehicles [5][12]. Urban Rail and Infrastructure - The urban rail and infrastructure segment has faced short-term pressure but is expected to recover in the long term due to clear planning and increased passenger volumes. The gross profit margin for urban rail has improved from 19% in 2020 to 21% in 2023, indicating better operational quality [6][12]. Overall Business Performance - The overall business performance of China CRRC has shown stability and improvement, with a return to profit growth after a downturn during the pandemic. The company has effectively managed costs, leading to a recovery in profit margins [27][31]. The gross profit margin has stabilized around 21%, and the net profit margin has remained around 5% [31][32]. Market Data - As of the report date, the closing price of the stock is 6.74 yuan, with a market capitalization of approximately 193.43 billion yuan [9][10]. The price-to-earnings ratio is projected to decrease from 16.60 in 2022 to 11.92 by 2026, indicating potential for value appreciation [2][7].