Event: The company released its 2024 annual results. In 24 years, the company achieved operating income of 24.909 billion yuan, a year-on-year increase of 13.42%; the net profit attributable to the parent company was 3.703 billion yuan, a year-on-year increase of 21.77%; The net profit of non-attributable to the parent company was 3.226 billion yuan, a year-on-year increase of 24.28%, the rapid growth of rail transit equipment, and the revenue of emerging equipment exceeded 10 billion. In 2024, the company's two major business segments will achieve rapid growth. In terms of sub-sectors, the revenue of rail transit equipment business in 24 years was 14.636 billion yuan, a year-on-year increase of +13.37%. Among them, the communication signal business achieved high growth, with revenue of 1.105 billion yuan hitting a record high, a year-on-year increase of +67.50%; electrical equipment revenue was 10.990 billion yuan, a year-on-year increase of +7.41%; the revenue of rail construction machinery was 1.891 billion yuan, a year-on-year increase of +12.22%; other income was 650 million yuan, a year-on-year increase of +95.02%. The development of emerging equipment business accelerated, and the annual revenue was 10.115 billion yuan, a year-on-year increase of +13.71%. Among them, the revenue of basic devices was 4.110 billion yuan, a year-on-year increase of +11.02%; the revenue of electric drive system of new energy vehicles was 2.569 billion yuan, a year-on-year increase of +23.96%; new energy power generation revenue was 2.036 billion yuan, a year-on-year increase of +5.70%; offshore equipment revenue was 865 million yuan, a year-on-year increase of +18.04%; The income of industrial conversion was 535 million yuan, a year-on-year increase of +15.93%.

The gross profit margin has increased significantly, and the R&D investment has remained high. In 24 years, the company's comprehensive gross profit margin was 32.48%, a year-on-year increase of +3.87pct, mainly due to the increase of 6.17pct in the gross profit margin of the rail transit equipment business, and the net profit margin was 15.85%, +1.40pct year-on-year. The company's expense ratio was well controlled during the period, and the annual selling/administrative/financial expense ratio was 2.37%/4.69%/-0.59%, +0.11pct/-0.20pct/+0.60pct year-on-year. R&D investment continued to maintain a high level, with an annual R&D expenditure of 2.657 billion yuan and a R&D expense ratio of 10.67%.

Rail transit equipment has blossomed in many places, and the growth momentum is steady. The company has a solid position in the rail transit traction system, continues to develop new products and new markets in the railway field, obtains new orders for new energy locomotive traction systems, and realizes the comprehensive supporting of CR450 EMU prototypes and the batch application of automatic driving of 20,000-ton heavy-haul trains, which is expected to continue to benefit from the high prosperity of the railway industry. In terms of the urban rail market, the company's domestic market share of urban rail traction system has remained above 50%, leading the industry for 13 consecutive years: at the same time, it has continuously made breakthroughs in communication signal business, power supply system business and business, and successfully developed new projects and new markets. At present, China's urban rail market has entered a new stage of bottoming out of new lines and gradually releasing the demand for renewal and maintenance, and the company is expected to achieve steady growth in revenue by virtue of its leading market position.

Emerging equipment continues to make breakthroughs, and deep-sea equipment is expected to welcome new opportunities for development. The company's power semiconductor, new energy vehicle electric drive, sensors and other sectors have a leading market position, the wind and solar hydrogen storage business continues to develop, the product and technical capabilities of various segments continue to improve, and the company's emerging equipment business has always maintained high growth in recent years. The offshore equipment business grasped the trend of electrification, and the launch of electric ROVs on the market was accelerated, achieving a new high in revenue and orders. This year's government work report proposes to promote the safe and healthy development of emerging industries such as deep-sea technology, and the company's offshore equipment covers underwater robots, underwater trenching and cable laying mining equipment and other products, which are expected to benefit from the development of deep-sea technology.

Investment suggestions: It is expected that the company will achieve net profit attributable to the parent company of 4.357 billion yuan, 4.849 billion yuan and 5.256 billion yuan respectively from 2025 to 2027, with the corresponding EPS of 3.18, 3.54 and 3.84 yuan, and the corresponding PE of 15 times, 14 times and 12 times, maintaining the recommended rating.

Risk warning: the risk that the investment in fixed assets is less than expected, the risk that the development of new products is less than expected, and the risk of intensified market competition.