CRSC(SH:688009) HTSC·2024-12-15 08:10Investment Rating - The report initiates coverage on China Railway Signal & Communication Corp (3969 HK/688009 CH) with a "Buy" rating, setting target prices at 7.56 RMB and 4.12 HKD for A/H shares respectively [3][10]. Core Views - The company is a leading provider of rail transit control systems globally, maintaining a dominant market share in domestic railway and urban rail communication signal systems. The report anticipates stable growth in the next 3-5 years, driven by the demand for system upgrades and overseas business expansion [3][25]. - The railway industry is expected to maintain high investment levels until 2028, benefiting the company as it holds over 60% market share in railway communication signal systems. The report estimates that approximately 11,000 kilometers of high-speed rail systems are due for upgrades starting in 2025, which could significantly enhance revenue [4][25]. - Urban rail construction is entering a stable development phase, with the company expected to benefit from a projected CAGR of 17.1% in the urban rail communication signal system upgrade market from 2025 to 2028 [5][26]. - The company possesses leading core technologies and a comprehensive innovation system, which positions it well for international market participation. The overseas order growth from 2020 to 2023 has shown a CAGR of 36%, indicating strong potential for future expansion [7][27]. Summary by Sections Investment Rating and Valuation - The report assigns a "Buy" rating with target prices of 7.56 RMB for A shares and 4.12 HKD for H shares, based on a PE ratio of 18/9 times [3][10]. Industry Outlook - The railway investment and construction are projected to remain robust until 2028, driven by fixed asset investments and passenger volume growth. The company is expected to benefit from this high industry demand [4][25]. - The urban rail market is stabilizing, with expected new operational lines in 2024-2025 remaining consistent with 2023 levels, and a significant portion of the urban rail communication signal systems is due for upgrades [5][26]. Financial Projections - The report forecasts EPS for 2024, 2025, and 2026 to be 0.35, 0.42, and 0.44 RMB respectively, with corresponding PE ratios of 18.18, 15.28, and 14.57 [6][9]. Technological Leadership and Growth Opportunities - The company’s advanced technologies and strong innovation capabilities solidify its market leadership. The report highlights the potential for growth in overseas markets and low-altitude economy sectors, with significant planned projects in both the Asia-Pacific and European regions [7][27].