S&P expects CRRC's railway equipment orders in China to slow down this year, with a slight increase in EBITDA

S&P Global Ratings expects that China Railway Rolling Stock Corporation (01766.HK) will see a slowdown in railway equipment orders this year, but will still maintain cash flow levels, partly due to improved operational efficiency. S&P estimates that after a 10.8% growth last year, China Railway Rolling Stock Corporation will record low single-digit growth this year, reflecting a decrease in bidding activities after last year's five-year high of 278 train sets.

However, last year saw a significant increase in new orders for train sets, with some of these orders expected to be delivered this year, providing some visibility for revenue in this business. The demand for locomotive replacements will also be supported by the government's "14th Five-Year Plan" equipment renewal program. Additionally, driven by China's energy transition, the demand for new industrial businesses should support moderate expansion in the next one to two years.

At the same time, S&P believes that stricter cost control and improved operational efficiency can buffer the impact of rising input costs and intense competition in new industrial businesses; it expects EBITDA margins to remain roughly flat this year, with EBITDA slightly increasing to RMB 26.5 billion to 27.5 billion.

S&P anticipates that the company will generate positive free operating cash flow in 2026 to 2027, based on stable profitability, robust operating cash flow, and prudent capital expenditures. Adjusted capital expenditures are expected to continue to decline slightly after falling from RMB 9.7 billion in 2024 to RMB 8.8 billion in 2025. Strong free operating cash flow will enhance the company's net cash position in the next one to two years