瑞士信贷－中国铁路行业首次覆盖－20130618

那夜很冷

China Railway Operators
Sector  
18 June 2013
Asia Pacific
Equity Research
Railroads  
Table of contents
Focus charts  2
Silver train is coming, get on now  3
Passenger fares under-priced  3
Freight tariff: Limited upside due to competition  3
Debt nationalisation and capex reduction  3
Significant earnings upside, valuation undemanding  3
Valuation table  4
Passenger fares under-priced  7
Passenger tariff regulation: China vs other countries  7
Passenger tariff regulation in other countries  7
Passenger tariff regulation in China  7
China’s conventional railway fares 51% under-priced  9
Modest competition from other modes of transportation = partial tariff regulation  12
Affordability should not equal price rigidity  12
High speed railways: Differentiated pricing by region  13
Freight tariff: Limited upside due to competition  15
Tariff regulation framework: China vs other countries  15
Competition from road transportation caps tariff upside  17
High likelihood for construction fund surcharge to be absorbed into the base rate  18
A word on freight reform  19
Debt nationalisation and railway capex reduction  20
History shows that reform / privatisation itself is not a silver bullet on existing debt  20
No exception for China  21
Implications on M&A  24
Significant earnings upside, valuation undemanding  25
High EPS upside from railway tariff de-regulation  25
Potential earnings’ downside from value-added tax  25
Some background information on VAT reform in China  25
Undemanding valuation  26
Risks  28
Appendix I: Reform experiences in other countries  29
Tariff deregulation  29
Improving productivity and decreasing labour cost  29
Vertical or horizontal separation  31
Appendix II: Long way ahead for China  34
Introducing competition within the rail system  34
Appendix III: Historical valuations  36
Guangshen Railway  (0525.HK / 525 HK)  37
Upside from tariff increment; undemanding valuation  37
Company overview  38
Background information  38
Company history and shareholding structure  38
Diversified business structure  39
Declining margin trends  39
Freight: Affected by the weak macro environment  40
Railway network usage and services  40
YTD traffic trend: Freight and intercity continue to soften  41
Traffic diversion by Guangzhou-Shenzhen-HK HSR  43
Key risks  46
Financial summary  47
Daqin Railway Co. Ltd.  (601006.SS / 601006 CH)  49
An undervalued railway operator  49
Focus charts and table  50
Financial summary  51
Volume: Downside risk not likely  52
Railway capacity expansion is on the way…  52
…but still not enough to cover 100% coastal demand by 2015  53
Newly added railway capacity would take trucking’s share  54
Tariff: Construction surcharge may offer a big surprise  56
Special construction fund surcharge to be absorbed into base rate  56
Earnings forecast  58
Coal inventory dropped to 6.4 mn t from 8.2 mn t in 2012  59
COGS: The biggest swing factor  59
Valuation undemanding  61
Best ROE and dividend yield among peers  61
Probability weighted valuation  62
Investment risks  63
Coal demand risks  63
Higher-than-expected labour cost  63
Key financials  64
Appendix: Company background  66
Company profile  66
Shareholding structure  68
Tielong Container  (600125.SS)  70
Unappealing prospect  70
The monopoly player in rail special container transport  72
Rail special container a small business  72
Traffic volume of rail special containers slows down  74
Intermodal logistics to be the direction  75
Unappealing demand prospects  77
Bulk special container: Overlap with general containers  77
Foldable special container: Suffered from the weak import of woods  78
Chemical containers: New focus of the company  78
Railway reforms to likely bring uncertainty  78
Weak traffic demand on Shaba Line  79
Share in Yingkou Port is declining  80
Current macro-economic condition does not promise traffic growth  80
Key risks  81
Valuation  82
Appendix: Company background  83
Company profile  83
Shareholding structure  84