Core Viewpoint - The implementation of the "Private Economy Promotion Law" marks a significant step in supporting private enterprises' participation in major national projects, particularly in the railway sector, with the Hangzhou-Shaoxing-Taiwan Railway serving as a key example of private capital involvement in high-speed rail [1][22]. Investment and Financing Promotion - The "Private Economy Promotion Law" includes provisions to support private economic organizations in participating in national strategic projects, with a focus on enhancing the financing environment for private enterprises [1][22]. - The Hangzhou-Shaoxing-Taiwan Railway project, signed in 2017, is a landmark initiative where private capital holds a controlling stake, demonstrating a shift in investment models within the railway sector [2][4]. Project Overview - The Hangzhou-Shaoxing-Taiwan Railway spans 266.9 kilometers with a total investment of approximately 45 billion yuan, featuring a 34-year cooperation period [2]. - The project is notable for being the first high-speed railway in China with majority private ownership, with a consortium of private enterprises holding 51% of the shares [1][4]. Operational Insights - Since its opening, the railway has seen a significant increase in passenger traffic, from 7 million in 2022 to an expected 25 million in 2024, indicating a positive growth trajectory despite initial challenges [8][10]. - The railway's operational model involves a partnership with the Shanghai Railway Bureau for train operations, which is a common practice in China's railway sector [12][23]. Future Expectations - The "Private Economy Promotion Law" aims to create a more favorable environment for private investment in infrastructure, potentially lowering financing costs for projects like the Hangzhou-Shaoxing-Taiwan Railway [22][23]. - There is an ongoing discussion about the future direction of railway reform, with a focus on either unified management or separation of infrastructure and service operations, which could impact private sector participation [16][17]. Challenges and Opportunities - The railway sector has historically been dominated by state-owned enterprises, but the introduction of private capital is seen as a crucial step towards market reform and increased competition [13][17]. - The Hangzhou-Shaoxing-Taiwan Railway serves as a model for future projects, with lessons learned from its financing and operational strategies that could inform subsequent private investments in the railway industry [6][13].

Investment Rating - The report maintains a "Buy" rating for the company [3][6]. Core Views - The company reported a net profit of 12.768 billion yuan in 2024, representing a year-on-year increase of 10.6%, with total revenue of 42.157 billion yuan, up 3.6% year-on-year [6]. - The passenger revenue growth in 2024 faced pressure due to the business travel demand and competition from airlines, resulting in a 1.57% decline in passenger revenue to 15.829 billion yuan [6]. - The cross-line trains remain a core profit driver, with network service revenue growing by 7.15% to 25.955 billion yuan in 2024, and cross-line train operation mileage increasing by 11.4% [6]. - Cost optimization is expected, with a projected improvement in gross margin due to reductions in depreciation, energy, and train usage costs [6]. - The railway market reform is anticipated to enhance the asset value of railway passenger transport, driven by price optimization policies [6]. - The profit forecast for 2025 and 2026 has been revised downwards, with expected net profits of 14.55 billion yuan and 15.613 billion yuan respectively, while a new forecast for 2027 is set at 17.737 billion yuan [6]. Financial Data and Profit Forecast - Total revenue forecast for 2025 is 45.124 billion yuan, with a year-on-year growth rate of 7.0% [2]. - The projected net profit for 2025 is 14.55 billion yuan, reflecting a 14.0% year-on-year increase [2]. - The earnings per share (EPS) for 2025 is estimated at 0.30 yuan, with a gross margin of 48.7% [2]. - The return on equity (ROE) for 2025 is projected at 6.8% [2].