The company is a leading enterprise of rail transit equipment in China, with a long history and perfect industrial layout. Founded in 1959, the predecessor and parent company of Zhuzhou CRRC Times Electric Co., Ltd., CRRC Zhuzhou Electric Locomotive Research Institute Co., Ltd., was registered and established in 2005, successfully listed on the Hong Kong Stock Exchange in 2006, and listed on the Science and Technology Innovation Board in 2021. The company adheres to the "double-high and double-effect" high-speed traction management model, adheres to the development strategy of "concentric diversification", and forms a complete industrial chain structure of "basic devices + devices and systems + complete machines and engineering" around technology and market, and the industry involves rail transit, new energy power generation, power electronic devices, automotive electric drive, industrial electrical, offshore equipment and other fields.

Rail transit equipment and emerging equipment two-wheel drive to help the company take off. The company is mainly engaged in the research and development, design, manufacturing, sales and related services of rail transit equipment products. The company has become a high-tech enterprise with independent intellectual property rights in the fields of electrical system technology, converter and control technology, industrial converter technology, train control and diagnosis technology, rail engineering machinery technology, power semiconductor technology, communication signal technology, data and intelligent application technology, traction power supply technology, inspection and testing technology, deep-sea robot technology, new energy vehicle electric drive system technology and sensor technology.

The company's revenue and profit fluctuated slightly, and it has returned to the upward channel. From 2019 to 2023, the company's operating income increased from 16.304 billion yuan to 21.799 billion yuan, and the net profit attributable to the parent company increased from 2.659 billion yuan to 3.106 billion yuan. From 2020 to 2021, due to the impact of public health events, the domestic railway cargo/passenger volume and railway construction investment have decreased, and the progress of urban rail construction planning has slowed down, and the company's revenue has been under pressure, with a year-on-year decrease of 1.66% in 2020 and a year-on-year decrease of 5.69% in 2021, and in 2022-2023, with the gradual increase in the volume of emerging equipment business and the gradual recovery of demand for superimposed rail transit equipment business, the company's revenue and profit will return to the upward channel.

Railway investment has a strong plan and a high degree of completion, and the investment amount is expected to be replenished in the later stage of the "14th Five-Year Plan". During the "13th Five-Year Plan" period, the total investment in fixed assets of railways nationwide was 3,990.1 billion yuan, with an average annual investment of 798 billion yuan. From 2021 to 2022, affected by public health events, the passenger volume of rail transit declined, and the center of railway fixed asset investment shifted downward compared with the "13th Five-Year Plan", with the national railway fixed asset investment of 748.9 billion yuan and 710.9 billion yuan respectively, and 764.5 billion yuan in 2023. According to China Railway Group, combined with the arrangement of projects under construction and proposed, it is expected that the total scale of national railway fixed asset investment in the "14th Five-Year Plan" is generally comparable to that of the "13th Five-Year Plan", considering that the national railway fixed asset investment in 2021-2023 will be 2,224.3 billion yuan, we expect that the average annual fixed asset investment in the national railway in 2024-2025 is expected to exceed 800 billion yuan.

Investment suggestion: Based on the recovery growth of the company's main business and the progress of new business in full swing, we predict that the company's net profit attributable to the parent company in 2024-2026 will be 37.94/45.42/5.243 billion yuan respectively, with a year-on-year growth rate of 22.2%/21.1%/14.2% respectively, and the corresponding PE will be 16X/14X/12X respectively, maintaining the "recommended" rating.

Risk warning: the risk that the demand for rail transit is less than expected; the risk that the business development of emerging equipment is less than expected; Risks of intensifying competition in the industry.