China Galaxy Securities: The bidding for the high-level maintenance of the EMU trains has been finalized, and the railway sector's prosperity continues.

China Galaxy Securities released a research report stating that all the models for the Level 5 repair bidding this year are from the Harmony CRH series, with procurement peaks occurring between 2014 and 2016. Beginning in 2026, these models will enter their first or second round of Level 5 repairs according to the repair intervals. The firm estimates that the average market space for advanced repairs during the 14th Five-Year Plan period is expected to exceed 50 billion yuan, and they remain optimistic about the sustained high demand for railway equipment. With the continued prosperity of the railway industry, railway investments are expected to remain high, supporting steady growth in the performance of railway equipment companies through ongoing procurement of new trains and advanced repairs. Under the dual-driven model of rail transit and ShenZhen New Industries Biomedical Engineering, they are optimistic about CRRC Corporation (01766) maintaining stable operations in the medium to long term. Event: On August 6, the State Railway Group announced the tender for the second batch of advanced train repairs for 2026, totaling 421.125 standard sets. The main points from China Galaxy Securities are as follows: Advanced Train Repairs Tender Continues to Grow at High Levels Recently, the State Railway Group announced the second batch of advanced train repair tenders for 2026. This tender includes 161.125 sets for Level 3 repairs, 105 sets for Level 4 repairs, and 155 sets for Level 5 repairs. Combined with the first round of advanced train repair tenders announced in January this year (which included 185.375 sets for Level 3, 103 sets for Level 4, and 78 sets for Level 5), the total tenders for the year amount to 346.5 sets for Level 3, 208 sets for Level 4, and 233 sets for Level 5 repairs. In terms of volume, the two rounds of advanced train repair tenders this year total 787.5 sets, marking an increase of 124 sets over the same period last year and second only to the peak in 2024. In terms of structure, the two tenders for 2026 comprise a total of 346.5 sets for Level 3, 208 sets for Level 4, and 233 sets for Level 5, with a significant increase in the number of Level 3 repair tenders (up from 90.25 sets in 2025), setting a historical record for the third-highest amount; however, the number of Level 4 and Level 5 repairs has decreased, with a reduction of 27.25 sets and 105 sets, respectively, compared to the previous year. In terms of models, all Level 5 repair tenders this year are for the Harmony CRH series, which peaked in procurement between 2014 and 2016, and will enter their first or second round of Level 5 repairs starting in 2026 based on repair intervals. Railway Industry Prosperity Expected to Continue In the first half of 2026, national railway fixed asset investment totaled 363.2 billion yuan, up 2.1% year-on-year, continuing to grow from last years high level; new lines put into service amounted to 355.2 kilometers, a 16.5% year-on-year increase. During the first half of the year, the national railway transported 2.348 billion passengers, a 5% increase year-on-year, setting a historical high for the same period; cargo volume reached 2.622 billion tons, a 2.5% year-on-year increase. With robust passenger traffic and stable cargo growth, the State Railway Group has maintained high levels of bidding for various types of railway vehicles this year. So far, the State Railway has cumulatively bid for 70 sets of trains capable of 350 km/h (compared to 68 sets during the same period in 2025), 67.375 sets of trains capable of 160 km/h (compared to 42 sets in 2025), 34,800 freight cars (surpassing the total for 2025), and 398 locomotives (compared to 455 in the same period of 2025). Based on the firms analysis of the routes, it is expected that the average annual new operational mileage during 2026-2028 will exceed 3,000 kilometers, with 2027 being a peak year for operational lines. In the coming three years, tenders for new train procurement are expected to remain high; simultaneously, train maintenance will progress according to repair intervals, entering a release period starting in 2024. The firm estimates that the average market space for advanced repairs during the 14th Five-Year Plan period is expected to exceed 50 billion yuan, and they continue to be optimistic about the sustained high demand for railway equipment. Optimistic about CRRC Corporation's Continued Steady Growth According to the State Railway Groups 14th Five-Year Plan, by 2030, the national railway operating mileage is projected to reach approximately 180,000 kilometers, with about 60,000 kilometers of high-speed rail. By 2025, national railway operating mileage was 165,000 kilometers, of which high-speed rail accounted for 50,400 kilometers. This means that, from 2026 to 2030, an average of 2,000 kilometers of new high-speed rail will come into operation each year. At the same time, rail transit is entering a major repair cycle. Under the demand from new constructions and upgrades, the company's railway equipment business is expected to maintain stable operations. As for ShenZhen New Industries Biomedical Engineering, during the 14th Five-Year Plan period, industries such as wind and solar energy storage, semiconductors, power grids, and marine equipment are expected to develop rapidly, driven by policy and demand; the companys product technology and market position are leading, suggesting that the ShenZhen New Industries Biomedical Engineering business is likely to continue to grow rapidly in the future. With the dual-driven model of rail transit and ShenZhen New Industries Biomedical Engineering, they are optimistic about CRRC Corporation maintaining stable operations in the medium to long term. Risk Warning: Risks of fixed asset investment growth falling short of expectations; risks of economic growth not meeting expectations; risks of downstream demand recovery being weaker than anticipated; risks of increased market competition; risks of tenders falling below expectations, etc.