Haitong Securities released a research report saying that in 2024, the demand for EMU procurement bidding and advanced repair will remain high, and the implementation and promotion of the equipment renewal policy and the elimination and renewal policy of old diesel locomotives, and the acceleration of going to sea, rail transit equipment is expected to benefit, and it is expected that the investment in railway fixed assets will be +11%/8% year-on-year in 24/25, and the urban rail will maintain high-quality development. In terms of railway vehicles, the demand for EMU procurement and advanced maintenance has risen, and locomotives have a large replacement space; With the recovery of passenger flow and policy support, equipment procurement is expected to continue in urban rail transit. The communication and signaling system focuses on the new construction and replacement space of the railway train control system. Based on this, the investment can focus on the manufacturing of railway vehicles, communication and signal systems, and power supply systems.

The main views of Haitong Securities are as follows:

Rail transit mainly includes railway and urban rail transit, and equipment is the core link

Rail transit refers to public transportation facilities with fixed lines, fixed tracks, transportation vehicles and service facilities, mainly including railways and urban rails. Rail transit construction can be divided into pre-station and post-station projects, and the investment nodes of each link are different, among which the rail transit equipment industry chain represented by vehicles and lines is the core link. From the perspective of the investment expenditure structure of rail transit fixed assets, vehicles account for about 10%-15%, and communications, signals and information account for about 4%.

Rail transit has strong planning attributes, and it is expected that the investment in railway fixed assets in 24/25 will be +11%/8% year-on-year, and urban rail will maintain high-quality development

1) Railway: In recent years, railway construction planning documents have been intensively promulgated, and the railway construction planning has a high degree of completion. At the same time, since the middle of the "14th Five-Year Plan", the planning and construction of the railway network has accelerated, and it is expected that the investment in railway fixed assets in 25 years will be +8% year-on-year.

2) Urban rail: Since 2018, the state has standardized the approval qualifications of local urban rail projects to ensure the orderly development of the urban rail industry, and the scale of urban rail lines under construction and investment has stabilized during the 14th Five-Year Plan period, maintaining high-quality development.

Railway vehicles: EMU procurement and advanced maintenance needs have emerged, and locomotives have a large replacement space

1) EMUs: In 2023, high-speed rail will account for nearly 30% of the railway operating mileage, and with the strong railway passenger flow and the good quality of national railway operation, it is expected that the purchase volume of EMUs will reach 253 groups in 25 years, corresponding to a market space of 43.6 billion yuan. At the same time, some models have entered the middle and late stages of the design life, and there is a large demand for early maintenance and operation and maintenance, and advanced repair has become a new attraction in the EMU link, and it is expected that the five-level repair demand of EMUs will be about 511-590 groups from 2025 to 2030. In addition, the growth expectation of regions along the "Belt and Road" is more prominent, and high-speed rail is expected to become a new growth level.

2) Locomotives: Policies such as "road to rail" and "multimodal transport" promote the procurement demand of railway locomotives, and policies accelerate the replacement of old diesel locomotives. It is estimated that the average annual replacement space of old locomotives from 2024 to 2027 will be 25.7 billion yuan/18 billion yuan/7.7 billion yuan under optimistic/neutral/pessimistic assumptions, respectively. In addition, new energy locomotives have become the future development direction.

Urban rail transit: passenger flow is picking up, and policies for metropolitan areas and urban agglomerations support long-term development

The subway has a large carrying capacity and is the most important mode of urban rail transit, while the rail transit system is showing diversified development, and the low-capacity system is ready to wait. In the short term, the intensity of passenger transport has picked up, and the ratio of urban rail operating income and expenditure has improved, supporting the procurement of urban rail equipment; In the medium and long term, policies for metropolitan areas and urban agglomerations will be intensively introduced, and the intensity of urban rail investment is expected to continue.

Communication and signal system: the core of rail transit operation, focusing on the new construction and replacement space of the railway train control system

The communication signal system is the control center of rail transit operation, which is used to ensure the safety of efficient train operation, and the train control system is the core of the communication signal system.

1) Railway train control: China's railway train control system has been successfully localized, mainly including CTCS-0 to CTCS-4 a total of 5 levels. It is estimated that: (1) new lines: from 2024 to 2030, the railway train control market space will accumulate nearly 70 billion yuan; (2) Updating and upgrading lines: From 2024 to 2030, the railway train control market space will be close to 90 billion yuan.

2) Urban rail train control: The CBTC train control system is mainly adopted, and the new generation of technology is continuously iteratively upgraded on the basis of CBTC. It is expected that: (1) new lines: the new demand for urban rail signaling system is expected to rebound in 2025; (2) Transformation of existing lines: The market space of urban rail signaling system will be close to 40 billion yuan in 2023.

Investment suggestion: focus on railway vehicle manufacturing, communication and signal systems, and power supply systems

It is recommended to pay attention to companies such as CRRC (01766, 601766.SH), China General Number (03969, 688009.SH), and Times Electric (03898, 688187.SH).

Risk warning: the investment in railway fixed assets is less than expected; The policy is not advancing as expected; increased competition; Calculation errors that may occur in this paper, etc.