The acceleration of railway information technology investment, AI facilitates intelligent progress

Abstract

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

• Railway total investment welcomes a "bottom rebound" turning point, the ten-year renewal cycle will restart. From 2014 to 2023, railway investments amounted to 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 765.4 billion yuan respectively. It can be seen that since 2020, railway investment has been declining year by year, but in 2023 it rebounded to 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 purchase volume of the Fuxing high-speed train set exceeds expectations, demonstrating the investment enthusiasm of China Railway. The first bidding announcement for 2024 shows that the purchase volume reaches 165 sets (aggregated from different formations), exceeding the total purchase 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 significant cycle for railway investment. After ten years, large-scale equipment updates will be reinitiated. Therefore, the total investment in railway fixed assets will show a trend of annual increase at the beginning of the cycle, with a considerable absolute amount, and gradually decline towards the end of the cycle. The turning point in 2023 and the trend of year-on-year growth in investment in the first four months of 2024, along with the scale of the first batch of high-speed train procurement in 2024 exceeding last year's historical levels, strongly indicate that the new cycle of railway investment is gradually emerging. National Railways is showing strong enthusiasm for investment. We expect that within the next three years, there will be a golden period for the replacement of various products combined with the introduction of new products, and the total amount of investment in railway fixed assets will gradually increase.

Mesoscopic Level - Under the Wave of Large-scale Equipment Updates, Railway Informatization Investment Accelerates:

• Policy Support: In September 2023, China National Railway Group Co., Ltd. issued the "Digital Railway Planning". According to the "Planning", 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 intelligence level across various railway business fields will be comprehensively enhanced. According to the "14th Five-Year" Railway Technology Innovation Plan published by the National Railway Administration, the construction of the intelligent railway technology system architecture version 2.0 will be completed. By 2025, intelligent railway technology will achieve comprehensive breakthroughs, including technological innovations in intelligent construction, intelligent equipment, intelligent operations, and other areas.

• 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 and update subsidy policies, and strive to basically eliminate old diesel locomotives by 2027. This is also a concrete action taken by the railway industry to implement the Party Central Committee's directive on promoting large-scale equipment upgrades.

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

Micro-Level - AI Promotes the Intelligent Development of Railways. AI technology can accelerate the comprehensive intelligent upgrade of railway systems, such as using AI technology for safety monitoring (AI video analysis proactively reporting anomalies), intelligent detection and maintenance (early identification of faults and predictive maintenance), intelligent scheduling (optimizing train operation plans), passenger service optimization (analyzing passenger behavior and preferences), intelligent inspections, operational efficiency analysis, smart customer service, and various other fields. In practical applications, for example, Jiaxun Feihong launched the railway visual capability platform "Feihong Anshi Platform," which separates business systems from visual services through platform-based intelligent vision, achieving dynamic management of intelligent visual capabilities through standardization of algorithms and models; it also launched the country's 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 systems.

Recommended to pay attention to: Jiaxun Feihong (Railway Command and Dispatch System/Special Communication), China Traffic Signal (High-speed Maglev Operation Control System/Signal System), Huiguang Technology (Train Operation Control System/Automatic Ticketing System), Siwei Liekong (Train Operation Control System), etc.

Hash Rate---
Optical Communication: Zhongji Xuchuang, Xinyi Sheng, Tianfu Communication, Taicheng Light, Tengjing Technology, Guangku Technology, Guangxun Technology, Dekeli, Liant Technology, Huagong Technology, Yuanjie Technology, Cambridge Technology, Mingpu Optoelectronics. Computing Power Optimization/Scheduling/Rental: Hengwei Technology, Siter Technology, Zhongke Shuguang, a certain Mobile, a certain Unicom, a certain Telecom. Computing Power Equipment: a certain Communication, Ziguang Co., Ltd., Ruijie Networks, Shengke Communication, Feiling Kesi, Industrial Fulian, Hudian Co., Ltd., Hanwujing. Liquid Cooling: Invec, Shenling Environment, Gaolan Co., Ltd., Jialitu. Edge Computing Power Carrying Platform: Meige Intelligent, Guanghe Tong, Yiyuan Communication. Satellite Communication: a certain Weitu, a certain Satellite, Zhenyou Technology, Huali Chuangtong, Dianke Chip, Haige Communication.

Data Elements---
Operators: Some Telecom, Some Mobile, Some Unicom. Data Visualization: Vast Depth, Hengwei Technology, China New Cybersecurity. BOSS System: AsiaInfo Technology, Tianyuan Dike, Oriental National Trust.

Risk Warning: AI development may not meet expectations, computing power demand may fall short of expectations, market competition risks.