The Zhitong Finance App learned that Zhishang Securities released a research report saying that China Railway Group will promote passenger flow growth and improve the quality of passenger transport services through flexible implementation of the high-speed rail fare market-based mechanism. In the long run, it will help further improve the operating level of China Railway Group, and may affect the level of investment in railway fixed assets in the future, and the railway equipment industry will continue to prosper. We recommend CRRC (601766.H), China Railway Industry (600528.SH), Tianyi Shangjia (688033.SH), Yonggui Electric (300351.SZ), and is optimistic about China Express (688009.SH), Times Electric (), Thinking Control (DAB), Tiejian Heavy Industries (Sichuan), Traffic Control Technology (Logistics), Tieke Track (), etc. 688187.SH 603508.SH 688425.SH 688015.SH 688569.SH

The main views of Zheshang Securities are as follows:

Four high-speed railways, including Wuguang, Shanghai-Hangzhou, etc., issued price adjustment announcements, and high-speed rail fares flexibly implemented market-based mechanisms

According to information on the 12306 website on May 2, the four high-speed railways of Wuguang, Shanghai-Hangzhou, Hangzhou-Ningbo issued price adjustment notices. Starting June 15, 2024, the published fares for EMU trains with a speed of 300 kilometers per hour and above will be optimized and adjusted, and a flexible pricing mechanism will be established to differentiate factors such as season, date, time period, seat category, etc., and implement an orderly, differentiated discount and floating strategy. The published fare between stations will be limited to the published fare and 5.5 percent off as the lower limit. Take the Wuhan-Guangzhou high-speed railway as an example. Starting June 15, the announced ticket prices for the second class seat, first class seat, and business seat from Wuhan to Guangzhou South are 553, 885, and 1935 yuan respectively. The current ticket prices are 463.5, 738.5, and 1458.5 yuan respectively, with increases of 19.3%, 19.8.%, and 32.7%, respectively.

China Railway Group's operating performance continues to be steady and improving. In 2023, China Railway Group achieved revenue of 1245.4 billion yuan, a year-on-year increase of 10.5% and net profit of 3.3 billion yuan; in 2024, Q1 achieved revenue of 283.3 billion yuan, an increase of 4.2% over the previous year.

Railway fixed asset investment increased by 7.5% in 2023, and is expected to continue to gain strength in 2024

According to China Railway Group's 2023 Statistical Bulletin: 1) Railway fixed asset investment is expected to exceed 800 billion yuan in 2024. The scale of railway investment in 2016-2020 is about 4 trillion yuan. It is estimated that the “14th Five-Year Plan” investment scale is comparable to the “13th Five-Year Plan”. A total investment of 2.2 trillion yuan has been completed in 2021-2023, and railway fixed asset investment is expected to exceed 800 billion yuan in 2024. 2) In 2023, 3,637 kilometers of new lines will be put into operation, including 2,776 kilometers of high-speed rail. As of 2023, the operating mileage of national railways is 159,000 kilometers, including 45,000 kilometers of high-speed rail; the national railway network density is 165.0 km/10,000 square kilometers, the double track rate is 60.3%, and the electrification rate is 75.2%. More than 1,000 kilometers of new lines will be put into operation in 2024.

3) Passenger flow reached a record high, and the 2024 plan is to increase 4.7% year over year. On May 1, railways across the country sent 206.93 million passengers, setting a record high in the number of passengers sent in a single day. National Railways sent 966 million passengers in the first quarter of 2024, an increase of 27.9% over the previous year. In 2024, the National Railway plans to send 3,855 billion passengers, an increase of 4.7% over the previous year.

4) In 2023, China Railway Group's EMU tenders reached 164, nearly doubling from 22, and is expected to continue growing in 2024. As of 2023, railways across the country have 4,427 standard EMUs and 35,416 vehicles. In 2023, China Railway Group launched 3 EMU tenders in June, November, and December, respectively, for 103 groups, 55 groups, and 6 groups, for a total of 164 groups, which is about double the number of tenders in '22 (87 groups). Railway passenger traffic has reached a record high, and demand for EMUs is good. It is expected that the number of tenders in 24 will continue to exceed 23 years.

The number of advanced EMU repairs has entered a period of increase, and we are optimistic about the rail transit equipment maintenance market

The average number of new EMUs added each year from 2010 to 2014 doubled compared to 2007-2009. According to statistics from China Railway Group over the years, China added an average of 95 new trains per year from 2007 to 2009. Starting in 2010, it reached 195, and added an average of 180 trains per year from 2010 to 2014. It is expected that trains added in 2010 will enter Level 5 maintenance starting in '22, and some maintenance work will be extended until '23. It is expected that starting in '23, the market will enter a period of growth after EMU maintenance. In 2024, the first tender for advanced EMU repair reached 323 trains, including 202 grade 5 trains, accounting for more than 50%.

The railway industry is implementing a new round of large-scale equipment updates, and strives to basically eliminate old internal combustion locomotives by 2027

According to information from China Railway Group on February 28, efforts are being made to basically eliminate old internal combustion locomotives by 2027. According to China Railway Group's 2023 statistical bulletin, the number of railway locomotives in the country is 22,400, of which 0.78 million are internal combustion locomotives, accounting for 34.7%. In 2023, the total freight delivery volume of the national railway reached 3,911 billion tons, an increase of 0.2% over the previous year. In 2024, the National Railway plans to complete the delivery volume of 3.93 billion tons of goods, an increase of 0.5% over the previous year. Freight volume is rising steadily, demand for locomotives is stable, and demand for replacement of old internal combustion locomotives is expected to be released steadily.

Risk warning: Infrastructure investment fell short of expectations; locomotive replacement pace was lower than expected; EMU tenders fell short of expectations.