CRRC, the world’s largest rail transit equipment manufacturer, both increased revenue and profits in the first half of the year. On August 27, CRRC Corporation Limited (hereinafter referred to as “CRRC”) released a semi-annual report showing that in the first half of 2021, the company achieved operating income of 95.464 billion yuan, a year-on-year increase of 6.78%; net profit of 3.989 billion yuan, a year-on-year increase of 8.02%.

Although CRRC’s revenue and profit have both increased, it has not yet returned to its pre-epidemic level. Revenue and profit have fallen by 0.71% and 16.57% respectively from the same period in 2019.

In the first half of 2021, CRRC’s four main businesses: main line railway equipment, urban rail and urban infrastructure, new industries and modern services accounted for 39.53%, 23.89%, 32.95% and 3.63% of total revenues respectively. Among them, the railway equipment business revenue was 37.735 billion yuan, a year-on-year decrease of 5.96%, mainly due to the decline in the income of the wagon business and the EMU business.

The revenue of urban rail and urban infrastructure business was 22.81 billion yuan, an increase of 7.33% year-on-year, mainly due to the increase in revenue from urban rail vehicles and urban rail engineering station equipment and facilities; among the four businesses, the new industry business revenue grew the fastest , a year-on-year increase of 25.49% and revenue of 31.459 billion yuan, becoming the second only business in the railway equipment sector. CRRC stated that the rapid growth of new industry business is mainly due to the increase in wind power business revenue.

 

In the first half of 2021, CRRC’s newly signed orders showed a polarized geographical breakdown, with newly signed orders of 94.9 billion yuan, of which newly signed overseas orders were 14.9 billion yuan. Newly signed orders fell by 7.23% year-on-year and 27.11% from 2019, the lowest in three years. At the same time, newly signed overseas orders grew against the trend, with a year-on-year increase of 43.27% and an increase of 26.27% from 2019, the highest in three years. The proportion of newly signed overseas orders has increased from 9.06% in 2019 to the current 15.70%.

Regarding overseas markets, CRRC stated that due to the overseas epidemic, it has become more difficult for CRRC’s overseas business to obtain orders. At the same time, the global economic turmoil and declining demand have brought a great negative impact on economic operations, business operations and market expectations.  There will still be many uncertainties in overseas markets in 2021.

Currently, China National Railway Group Co., Ltd. (hereinafter referred to as China Railway Group) is still CRRC’s largest customer, and CRRC’s sales to it accounted for 35.57% of total sales.

The semi-annual report shows that the current annual production capacity of CRRC’s EMUs, locomotives, buses, wagons, and urban rail vehicles are 547 sets, 1530 units, 2,300 units, 51,500 units and 11,800 units respectively. Based on the bidding volume in 2020, the annual purchase volume of the above-mentioned products is only about 40%, 26%, 10%, 58% and 40% of the annual production capacity. CRRC has a serious problem of overcapacity.

In this regard, CRRC stated that certain sections of CRRC’s rail transit have problems with overcapacity and are facing industrial structural adjustments. CRRC has established a special organization to study reform plans, and optimize the allocation of resources through business restructuring and capacity reduction in accordance with different strategic principles in different sectors. CRRC will strictly control the total assembly capacity of the above-mentioned vehicles, vigorously promote the “integration of repair and construction” of EMUs, urban rail vehicles and locomotives, promote the sharing of repair and new construction resources, and increase the utilization rate of new production capacity of EMUs, urban rail vehicles and locomotives.

Regarding the equipment procurement expectations of the National Railway Group in the second half of 2021, the National Railway Group’s annual locomotive and rolling stock procurement budget is about 54 billion yuan, which is basically achievable at present. “It is estimated that about 400 new locomotives and 35,000 trucks will be tendered this year. The only uncertainty factor is the high-speed EMU, which may not reach the 200-unit bidding target estimated at the beginning of the year.” He said.

Up to now, in 2021, China Railway Group has a total of 7 tenders for locomotives, including 3 tenders for locomotives, 3 tenders for Fuxing, and 1 tender for freight cars. On March 30, 2021, China Railway Group tendered a total of 34 7200kW freight and passenger electric locomotives; on April 9 it tendered another 50 9600kW freight electric locomotives, and on June 23, it tendered again 104 locomotives. A total of 188 locomotives were tendered for three times. According to reporters’ estimates, the total price was nearly 4.5 billion yuan.

In the first half of the year, China Railway Group also bid for the Fuxing EMU three times. On March 22, the tender for a total of 164 units with a speed of 350 kilometers per hour, Fuxing EMUs in 20.5 groups; on June 8th, the tender for 6 groups of 160 kilometers per hour power centralized EMUs; on June 23, the tender for 62 groups of 160 kilometers per hour for Fuxing centralized trains, the total price of the three Fuxing Trains bids is about 7 billion yuan. On June 29, China Railway Group also tendered 5,100 wagons. The total price of the 7 bids mentioned above is about 12 billion yuan.

The lower-than-expected railway passenger flow is the main reason why the National Railway Group’s demand for EMUs, especially high-speed EMUs, has weakened. So far, the bidding volume for high-speed EMUs this year has only reached 10% of the planned purchases.

In the first seven months of 2021, the national railways sent a total of 1.671 billion passengers. Although the year-on-year increase was as high as 63.02%, there is still a large gap between the current railway passenger flow and before the epidemic. In the first seven months of 2021, the national railway passenger flow decreased by 21.55% from the 2.130 billion passengers in the same period of 2019, of which July decreased by 14.04%. The current railway passenger flow has only recovered to 78.45% of the same period in 2019.

The reduction in the purchase of rolling stock has directly led to a slowdown in railway fixed asset investment, which is closely related to it. In the first July of 2021, railway fixed asset investment has completed a total of 362.830 billion yuan, a year-on-year decrease of 7.7%, of which July completed 63.9 billion yuan, a year-on-year decrease of 4.77%. In the first half of 2021, railway investment has become the lowest in the past six years, with only 298.949 billion yuan completed. Since 2016, the half-year investment has not exceeded the 300 billion yuan mark for the first time.

Railway fixed asset investment consists of infrastructure investment and equipment investment. Equipment investment is used for new construction and maintenance of rolling stock. In 2021, China National Railway Group’s equipment procurement may continue to be in a downturn. The total investment in locomotive equipment for the year will be between 70 billion and 75 billion yuan, basically the same as in 2020.

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