HTSC·2025-05-05 15:50Investment Rating - The report maintains a "Buy" rating for the company [4][7]. Core Views - The company reported Q1 2025 revenue of 6.734 billion RMB, a year-over-year increase of 2.84%, but a quarter-over-quarter decrease of 42.47%. The net profit attributable to shareholders was 562 million RMB, down 7.08% year-over-year and down 50.56% quarter-over-quarter [1][2]. - The company is expected to benefit from stable demand for rail transit equipment and increasing needs for upgrades and renovations, with overseas business and low-altitude economy potentially opening new growth avenues [1][4]. Revenue and Profitability - In Q1 2025, the company's gross margin was 27.23%, a decrease of 0.18 percentage points year-over-year, while the net margin was 9.74%, down 1.21 percentage points year-over-year. The operating expense ratio was 15.10%, a decrease of 0.39 percentage points year-over-year [2][3]. - The company's railway business revenue was 3.41 billion RMB, down 4.05% year-over-year, while urban rail business revenue grew by 21.66% to 1.96 billion RMB. Overseas business revenue increased by 66.91% to 299 million RMB [3]. Contract and Order Growth - The total new external contracts signed in Q1 2025 amounted to 7.213 billion RMB, a decrease of 36.51% year-over-year, primarily due to the company gradually abandoning low-margin engineering projects [3]. - New contracts in the railway sector totaled 4.234 billion RMB, up 6.25% year-over-year, while urban rail contracts reached 2.242 billion RMB, up 47.17% year-over-year [3]. Profit Forecast and Valuation - The company’s net profit forecasts for 2025-2027 are 3.957 billion RMB, 4.307 billion RMB, and 4.677 billion RMB, respectively, with corresponding EPS of 0.37 RMB, 0.41 RMB, and 0.44 RMB [4][6]. - The report assigns a target price of 6.66 RMB for A-shares and 3.85 HKD for H-shares, based on a PE ratio of 18x for A-shares and 9.5x for H-shares [4][7].