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[外行报告] 德意志银行——中国铁路建筑行业研究报告2008年7月 [推广有奖]

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Asia China
Transportation Infrastructure
29 July 2008
China Railway Infrastructure
Extended construction boom
Jin Xu, MBA
Research Analyst
(852) 2203 6131
jin.xu@db.com
Fundamental, Industry, Thematic, Thought Leading
Deutsche Bank Company Research’s Investment Policy Committee has deemed
this work F.I.T.T for investors seeking differentiated ideas. We believe China
railway constructors will enjoy an extended period of strong sector growth driven
by a series of upward revisions in China’s overly conservative 2020 railway
investment plan. We forecast China's railway infrastructure investments to grow
at 42% CAGR from 2008-2010 and at 12-21% CAGR from 2011-2020. We view
CRC and CRG as the two main listed beneficiaries of the railway investment plan.
Deutsche Bank AG/Hong Kong
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from
local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies.
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be
aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider
this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain
companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can
access IR at http://gm.db.com or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
FITT Research
Top picks
China Railway Group (0390.HK),HKD6.47 Buy
China Railway Constr. (1186.HK),HKD11.98 Buy
Companies featured
China Railway Group (0390.HK),HKD6.47 Buy
2007A 2008E 2009E
P/E (x) 103.6 36.3 21.1
EV/EBITDA (x) 28.6 10.3 7.4
Price/book (x) 4.0 2.1 1.9
China Railway Construction (1186.HK),HKD11.98 Buy
2007A 2008E 2009E
P/E (x) – 30.7 18.6
EV/EBITDA (x) – 9.7 6.8
Price/book (x) 0.0 2.8 2.5
Fundamental: Analyzing the sector’s long-term growth
We initiate coverage on China’s railway construction sector, which we believe will
benefit from unprecedented railway expansion. We performed a bottom-up
analysis of China’s long-term demand for railways and examined railway
construction companies’ margin expansion potential from various angles.
Industry: China railway construction to grow at 42% CAGR 2008-2010F
A line-by-line analysis of high-speed railway projects announced so far points to a
42% CAGR of investment in 2008-10. We also analysed the Ministry of Railway’s
(MoR) funding capability, which shows a gap of RMB222bn. We believe this gap
can be closed by a partial sale of the MoR’s stakes in some of the high-speed
railways it intends to list. Therefore, MoR can easily fund its 11-5 railway plan.
Thematic: CRC and CRG will benefit the most in our view
CRC and CRG are likely to be the primary beneficiaries of this railway construction
boom, in our view, as each company commands a sustainable 40% share in the
railway construction market. We believe their operational margins will continue to
improve as they further reduce their costs, take on more high-margin projects and
expand into overseas markets.
Thought leading: China’s 2020 railway plan may require upward revisions
We believe China’s railway construction boom will extend into 2020, contrary to
investor expectations of 2010/2011. Our proprietary analysis shows planned railway
investment should increase 57% to meet domestic demand, suggesting 12% p.a.
investment growth from 2011-2020, respectively. Our best-case scenario makes the
case for a 116% upward revision of the existing 2020 railway plan if China aspires to
have a globally competitive energy-efficient transportation system. This implies 21%
p.a. railway construction spending growth from 2011-2020.
Valuation: up to 65% and 55% upside potential for CRC and CRG
Our core DCF-based valuation reflects China’s existing 2020 railway plan, and
offers 22% upside for CRC and 13% upside for CRG. Our bull case valuation
assumes a 57% upward revision to the 2020 plan. We forecast 42% upside
potential for CRC and 30% upside potential for CRG. Our best-case valuation
suggests 62% upside potential for CRC and 50% for CRG, based on a 116%
upside revision of the 2020 plan.

Table of Contents
China’s railway network is surprisingly inadequate ...................... 4
Key points ................................................................................................................................4
Significant underinvestment .....................................................................................................4
Railway investment likely to grow 42% p.a. from 2008-10.......................................................6
Planned rail network still insufficient .............................................. 8
Key points ................................................................................................................................8
China’s long-term railway plan may be revised upward............................................................8
57% upward revision needed to satisfy domestic demand for rail transportation....................9
A best-case view: 116% upward revision of the plan to build an energy-efficient
transportation system .............................................................................................................10
Can China afford to pay?.........................................................................................................11
Sustainable margin expansion ....................................................... 14
Key points ...............................................................................................................................14
Railway construction is an oligopoly .......................................................................................14
Three major margin expansion drivers ....................................................................................15
Central procurement and escalator clause offer further protection ........................................18
CRC and CRG: Buy both.................................................................. 20
Key points ...............................................................................................................................20
Significantly better growth profile deserves premium pricing ................................................20
DCF-based TPs indicate 13% and 22% upside potential........................................................21
42% upside potential for CRC and 30% for CRG on a 57% upward revision of China’s 2020
railway network plan ...............................................................................................................21
CRC is a concentrated construction play while CRG provides an enhanced growth profile ...22
Risks.................................................................................................. 25
Appendix A: China’s infrastructure construction industry .......... 26
Regulatory framework.............................................................................................................26
Railway constructions projects award and cost review process ............................................27
Appendix B: Other railway construction boom beneficiaries...... 29
China Communication Construction (1800.HK, HK$15.44, TP HK$20.30, Buy).......................29
Shanghai Electric (2727.HK, HK$3.90, TP HK$4.40, Hold) ......................................................30
Sinohydro (Not listed)..............................................................................................................30
China National Coal Group (Not listed) ....................................................................................31
China Railway Construction ........................................................... 32
China Railway Group....................................................................... 52

Investment thesis
Outlook
We initiate coverage on China’s railway construction sector, which we believe will benefit
tremendously from an unprecedented scale of railway expansion. We project the sector will
grow at a 42% CAGR from 2008-2010, with the likelihood of a 12% CAGR from 2011-2020.
􀂄 Underinvested sector. On average, only 52% of China’s rail freight car demand has
been fulfilled, and its passenger rail is congested. Although the government earmarked a
budget of RMB1.25tr to extend and upgrade the system during 2006-2010, only
RMB332mn had been spent by 2007. We believe the sector will grow 42% p.a. during
2008-2010, and overall spending is likely to overrun the budget by 17%.
􀂄 China’s strong demand for railways could lead to upward revisions in the existing
long-term railway plan (120,000km by 2020), lifting the 2011-2020 investment
growth from 1.5% p.a. to 12% p.a. Further, we believe investment will need to be
increased by another 53% to build an extensive freight rail system like that of the US and
an energy-efficient passenger rail network like that of Japan. We believe the MoR has
capacity to fund its existing plan, though it might need greater participation from private
investors/local governments/banks should there be an upward revision.
􀂄 Railway construction companies will continue to experience margin expansion. We
believe there are three drivers of margin expansion: SG&A cost cutting, more high-speed
rail/city rail projects which offer better margins and more overseas contracts. The MoR’s
central procurement, contractors’ economy of scale and provision of cost-escalation
clauses will provide protection against rising raw material prices, in our view.
Valuation
Our core valuations are based on China’s existing railway plan, which result in 22% and 13%
upside potential for CRC and CRG, respectively. Should China’s government decide to raise
its long-term railway investment by 57%, we would expect another 20% and 17% upside
potential to our core upside targets.
Our FY08F DCF valuation uses WACC of 9.4% (Rf 5.2%, Rp 5.3% and beta 1.0) and terminal
growth of 3.0% for both companies. We assume 2013 as the terminal year when both CRC
and CRG’s business mix has stabilised and their EPS growth drops to low single digits. Our
TPs imply 23.5x 09E PE for CRG and 22.3x 09E PE for CRC, which we believe is appropriate
given their unparalleled growth profile (we project 30% CAGR and 35% CAGR over 2008-
2013E for CRC and CRG, respectively).
We like CRC not only because of more upside potential indicated by our TP, but also due to
its high concentration in the construction business (85% of earnings). We also like CRG for its
enhanced growth profile.
Risks
􀂄 Macro policy risk relating to China’s infrastructure spending, particularly the MoR’s
pending integration into the MoC
􀂄 Rising cost of raw materials and a higher level of competition
􀂄 Execution risk

China’s railway network is
surprisingly inadequate
Key points
􀂄 Significant underinvestment in China’s railway infrastructure
􀂄 Railway investment expected to grow by 42% p.a. from 2008-10
Significant underinvestment
Railways are a safe, fuel-efficient and environmentally-friendly mode of transportation. Given
China’s vast geographic area, fast-growing urban population and strong demand for raw
materials, railways provide an economic solution that blends well with the country’s strategy
of sustainable growth.

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关键词:行业研究报告 德意志银行 中国铁路 研究报告 建筑行业 研究报告 建筑行业 德意志银行 铁路

vivian_chi 发表于 2009-1-29 21:51:00 |显示全部楼层 |坛友微信交流群
500?开玩乐呢吧?

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amaze 发表于 2009-4-2 09:49:00 |显示全部楼层 |坛友微信交流群

是开涮!

他有没有还另说呢!

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dingxiaofei 发表于 2009-4-29 13:08:00 |显示全部楼层 |坛友微信交流群

我已付款,看看

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jgj990163 发表于 2009-11-21 18:07:04 |显示全部楼层 |坛友微信交流群
楼主猛
楼上的 更猛
你都 那样了。。。。。还花500.。。看看。。。。

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sanny000 发表于 2009-11-21 19:22:29 |显示全部楼层 |坛友微信交流群
500个,够狠呀

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Lao_zhang 发表于 2009-12-21 16:05:42 |显示全部楼层 |坛友微信交流群
太贵了,买不起!!!

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