18 February 2019

Top China pitchman on a roll — so is railway sector

All it took was a supportive gesture by Premier Li Keqiang {李克強} to get investors piling back into China’s railway sector. It helped that a building frenzy is under way on several intercity train projects.

Li has been an aggressive global pitchman for the Chinese railway industry, telling his Thai counterpart, Yingluck Shinawatra, that Chinese rail components and technology are “advanced, safe, reliable and economically competitive” during a recent visit to Bangkok.

Those were apparently magic words for investors.

And by coincidence, they were followed by high-profile announcements by rival train makers China CNR Corp. (601299.CN) and CSR Corp. Ltd. (01766.HK, 601766.CN) about hefty orders.

CNR said it won new contracts worth 20.9 billion yuan (US$3.4 billion), about 22 percent of revenue last year, while CSR unveiled 25.6 billion yuan in new deals, more than 28 percent of last year’s revenue.

On the whole, China’s railway sector has been performing well. Shares of CNR and CSR are up 14.5 percent and 8.6 percent, respectively. Train parts makers Taiyuan Heavy Industry Co. (600169.CN) and Jinxi Axle Co. Ltd. (600495.CN) have picked up 16.2 percent and 15 percent, respectively. 

Also, expectations that the government will fast track spending in the sector have buoyed railway plays. Wang Mengshu, a professor in the Chinese Academy of Engineering, estimates that national railway investment is running at about 414 billion yuan this year, 60 percent of the investment target, reports 

He expects China Railway Corp. to speed up investment for the remainder of the year to catch up with the target 

Local governments are keeping pace. Sichuan, Hunan, Jiangxi, Guangdong and Zhejiang are ramping investment in their intercity train projects and related infrastructure.

Sichuan is the newest player in this building frenzy. Dai Yongbo, deputy director of the Sichuan Development and Reform Commission, said the local government will invite tenders for the 11 billion yuan Chuannan intercity railway project next year.

The windfall does not stop at the door of the big boys. Zhuzhou Times New Material Technology (600458.CN), a CSR subsidiary, said it has bagged orders from Italy to kit out 50 high-speed trains. The deal includes core train parts such as suspensions and anti-roll torsion bars.

– Contact the writer at [email protected]



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