Investment in railway information technology accelerates, AI aids in the advancement of intelligence

Macroeconomic Level: The large-scale equipment renewal cycle for railway and rail transit is approaching, and overall fixed asset investment is expected to reach a turning point, with the industry's prosperity likely to accelerate year by year.

• The total investment in railways has reached a "bottom rebound" turning point, and the ten-year renewal cycle will reopen. From 2014 to 2023, railway investments were completed at 808.8 billion, 823.8 billion, 801.5 billion, 801.0 billion, 802.8 billion, 802.9 billion, 781.9 billion, 748.9 billion, 710.9 billion, and 764.5 billion yuan respectively. It can be seen that since 2020, railway investments have shown a downward trend year by year, but in 2023, there was a rebound reaching 764.5 billion yuan, a year-on-year increase of 7.5%; from January to April 2024, the national railway completed fixed asset investment of 184.9 billion yuan, a year-on-year increase of 10.5%.

• The procurement volume of the Fuxing high-speed trains exceeded expectations, demonstrating the proactive investment of China Railway. The "350 km/h Fuxing Smart Configuration Train Procurement Project" is one of the important tasks that China Railway Group executes annually. The first bidding announcement for 2024 shows a procurement volume of 165 sets ( different formations totaling ), surpassing the procurement volume of previous years in 2023, which were 103/55/6 sets ( respectively.

• We believe that due to factors such as equipment lifespan, ten years is a major cycle for railway investment. After a full ten years, there will be a large-scale replacement and upgrade of equipment. Therefore, the total investment in railway fixed assets will show a year-on-year upward trend at the beginning of the cycle, with absolute amounts being quite large, and will gradually decline towards the end of the cycle. The turning point in 2023 and the trend of year-on-year investment growth in the first four months of 2024, as well as the procurement volume of the first phase of high-speed trains in 2024 exceeding last year's historical amounts, all strongly indicate that the trend of a new cycle of railway investment is gradually emerging. The national railway shows strong enthusiasm for investment, and we expect to enter a golden period of various product updates and new product deployment within the next three years, leading to a gradual increase in the total amount of railway fixed asset investment.

Mid-level Perspective - Under the Wave of Large-scale Equipment Update, Rail Information Investment Accelerates:

• Policy Support: In September 2023, the National Railway Group issued the "Digital Railway Plan". According to the "Plan", by 2027, the level of railway digitization will be significantly improved, with key areas achieving intelligence. By 2035, the digital transformation of railways will be fully completed, and the degree of intelligence in all business areas of railways will be comprehensively enhanced. According to the "14th Five-Year" Railway Science and Technology Innovation Plan released by the National Railway Administration, a 2.0 version of the intelligent railway technology system architecture will be established. By 2025, intelligent railway technologies will achieve comprehensive breakthroughs, including technological innovations in intelligent construction, intelligent equipment, and intelligent operations.

• Industry Response: At the State Council press conference in February 2024, the National Railway Administration stated that it will formulate emission standards and management measures for diesel locomotives, improve the subsidy policy for updates, and strive to basically eliminate old diesel locomotives by 2027. This is also a concrete action by the railway industry to implement the Party Central Committee's directive on promoting large-scale equipment updates.

• We believe that, in the wave of railway upgrading and replacement, investment in information technology is an important trend, and the value of investment will concentrate in niche areas closely related to technological innovation and application expansion, such as smart equipment and operation maintenance, technological innovation, the integration of 5G + big data + artificial intelligence, etc.

Micro Level - AI Empowering Progress in Railway Intelligence

AI technology can accelerate the comprehensive intelligent upgrade of railway systems. For example, AI technology can be used for safety monitoring ), proactive reporting of anomalies through AI video analysis (, early identification and predictive maintenance of faults through intelligent detection and maintenance ), optimization of train operation plans through intelligent scheduling (, optimization of passenger services by analyzing passenger behavior and preferences ), intelligent inspection, operational efficiency analysis, intelligent customer service, and various other fields. In practical applications, a certain company launched the railway vision capability platform "Anshi Platform", which separates the business system from visual services through platform-based intelligent vision, achieving dynamic management of intelligent vision capability through standardization of algorithms and models. It also launched the first large model technology product in the railway industry, "Railway AI Knowledge Intelligent Assistant", which has been trialed in some railway bureaus, local railways, and urban rail.

It is recommended to pay attention to companies in related fields such as railway command and dispatch systems/specialized communications, high-speed maglev operation control systems/signal systems, train operation control systems/automatic ticket sales and inspection systems, and train operation control systems.

Risk Warning

AI development is below expectations, computing power demand is below expectations, and there are market competition risks.