Goldman Sachs: Rail equipment third-quarter results: CRRC deliveries delayed, Times Electric growth constrained by margins

Where did CRRC’s revenue shortfall come from?

In the third quarter of 2026, CRRC’s revenue was 63 billion yuan, down 2% year on year and 11% below Goldman Sachs’ original forecast; net profit was 2.32 billion yuan, down 15% year on year and 29% below the bank’s forecast.
Management attributed the weak revenue mainly to the timing of EMU deliveries: contracts for the 186 trainsets tendered from late August to early September were not signed until October, so they contributed neither deliveries nor revenue in the third quarter. Only 12 trainsets were delivered during the quarter, versus 70 in the second quarter.
Profit performance was not uniformly below expectations: third-quarter operating profit was 3.25 billion yuan, 14% above Goldman Sachs’ forecast, mainly because selling, general and administrative expenses were lower; gross margin was 20.8%, broadly in line with the bank’s forecast.

Management expects stronger EMU deliveries in 2027 as new lines enter service and potential replacement demand emerges. In the first three quarters of 2026, growth in locomotive and freight wagon revenue offset a decline in EMU revenue, and rail equipment revenue still rose 7% year on year to 94.1 billion yuan.
Constraints remain in other businesses: urban rail revenue grew 6% year on year in the first three quarters on deliveries from existing orders, but management said new orders continued to decline; emerging industries revenue grew only 5%, and the wind power and new energy equipment businesses remained challenging.
Goldman Sachs lowered its 2026 revenue forecast for CRRC by about 7% and cut its 2026–2030 revenue and earnings-per-share forecasts by 3%–7% and 0%–4%, respectively. An improved demand outlook for locomotives and freight wagons only partly offsets lower expected rail equipment revenue recognition and weakness in other businesses.

Times Electric’s third-quarter revenue was 7.75 billion yuan, up 17% year on year and 7% above Goldman Sachs’ forecast; net profit was 1.09 billion yuan, up 4% year on year. Gross, operating and net margins each fell by about 2 percentage points from a year earlier, to 31%, 15% and 14%, respectively.
In the first three quarters, rail transit equipment revenue rose 11% year on year, including 17% growth in maintenance revenue; semiconductor and electric vehicle revenue grew 16% and 39%, respectively, but new energy revenue fell about 50%.
Goldman Sachs believes weakness in the new energy business, raw material pressures and electric vehicle business profitability limit medium-term earnings upside. Cash flow also weakened: operating cash flow was a net outflow of 210 million yuan in the first three quarters, compared with a net inflow of 1.48 billion yuan in the first half, as the increase in payments to suppliers exceeded the improvement in customer collections.

Goldman Sachs maintained its Buy rating on CRRC’s H shares, citing among other factors its expected 2027 dividend yield of 5.4%; it maintained a Neutral rating on CRRC’s A shares. The bank lowered its target price-to-earnings multiple from 11 times to 10 times expected 2027 earnings, kept its 12-month H-share price target at HK$6.4, and cut its A-share target from 5.8 yuan to 5.7 yuan.
Goldman Sachs maintained Neutral ratings on Times Electric’s A and H shares, cutting its 2027–2030 revenue forecasts by 3%–5% and its 2026–2030 earnings-per-share forecasts by 1%–4%; it lowered its 12-month H- and A-share price targets to HK$36.3 and 49.5 yuan, respectively.