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What are the advantages of railway parts industry?
Jan 22, 2018

Advantages of railway parts industry.

The railway parts industry is superior to the whole vehicle industry in both revenue and gross profit rate.

Railway vehicle purchase expenditure growth is rapid and sustained, laying the groundwork for railway equipment industry revenue growth. During the rate will continue to fall, the relative valuation advantage, maintaining industry-leading market - B rating, the ministry of railways vehicles purchase expenditure rose faster, lay the foundation for railway equipment industry revenue growth.

The acceleration of railway construction has accelerated the growth of railway fixed asset investment in the first two months of this year, and the increase in the purchase and renovation of railway vehicles is more than 100%.

Although this in related enterprise income temporarily not fully reflected, but we believe that the railway investment in fixed assets this year at least to remain above 60%, which will lay a foundation for the annual income growth of railway equipment industry.

According to the industry, the railway locomotive accessories industry revenue growth faster than the vehicle industry.

Out the survey, 1 to 2 months this year the whole car industry revenue growth was only 6% (truck, locomotive did fall by nearly 50% year-on-year, passenger car jumped by 167%), and accessories and special equipment is still maintained a rapid growth (above 35%).

This is mainly due to the fact that although the demand for most of the vehicles has decreased, the production enterprises are still optimistic about the medium and long term demand growth, so the purchase of accessories still maintains a large increase.

The maintenance requirement of accessories is relatively rigid;

The export competitiveness of accessories is relatively large, and the impact of falling demand from overseas market is relatively small.

We expect to see more than 50 percent growth in passenger cars in the whole year, with trucks falling by about 20 percent and locomotives basically flat, and the revenue growth of accessories is still faster than that of the vehicle, but the gap will narrow.

The industry's gross profit rate has risen, and the gross profit rate of the parts industry has also risen relatively.

At present, the capacity utilization ratio of passenger vehicles (including the motor vehicle group) has been reduced to less than 50%, which has a negative impact on the industry's gross margin.

But since the second half of last year, steel prices fell back quickly to bring the gross margin increase significantly offset the negative impact, so the first two months of the year the industry profit margins continue to steadily rising (1%) than the same period last year.

According to the industry, the gross profit rate of the railway parts industry is higher than that of the whole vehicle, because the capacity utilization rate of the parts industry is significantly less than that of the whole vehicle.

The parts industry is more exposed to steel;

The production cycle of accessories is relatively short, and its cost is relatively fast.

This makes the price of accessory product and whole car price equally stable, the gross profit rate of the parts industry rises to be more apparent.

In the second quarter while capacity utilization rate increase, steel prices will be relatively stable, but part of the price of the product may decline, which makes the second quarter accessories industry profit margins will drop slightly, and the gross profit margin on the vehicle industry is likely to be flat or slightly higher.

In the long run, gross margins will continue to rise steadily.