China has been stepping up the tenders for railway trains after the 19th Communist Party of China National Congress. The government made a tender of 75 and 100 sets of multiple units respectively on November 4 and 10, raising the number of tenders to 314 this year. This also represented a 140% increase from the trough of 2016, and was back to the 2013 level. In light of this, we believe the worst in the China's railway industry is over and expect to see a gradual recovery with accelerating order growth improvement. Moreover, with rising length of high-speed railways and inter-city railways, strong demand growth for equipment installation and increasing need for high-speed rail equipment upgrade will all help boost the demand for high-margin maintenance services and component sales. We believe train and train component suppliers will be the direct beneficiaries of the sector recovery and recommend to accumulate the shares on weakness.

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