China Railway Sector:2014 railway FAI to decline 5% yoy

陈朝霞

China Railway Sector:2014 railway FAI to decline 5% yoy

来自：MACD论坛(bbs.shudaoyoufang.com) 作者：陈朝霞 浏览：3104 回复：0

2014 rail FAI will be 5% lower than that in 2013 China Railway Corporation (CRC) is holding its annual conference today to announcethe work plan for 2014. Mr. Sheng, the GM, said in the conference that the nationalrailway FAI target this year is set at Rmb630bn, 5% lower than the Rmb663bn achievedin 2013. The split between construction investment and rolling stock investment wasnot disclosed. Although the FAI target is slightly disappointing, we believe it is likely tobe revised up because: 1) railway new built length is set at 6,600km for 2014, muchhigher than 5,586km completed in 2013; and 2) traditionally, the full-year FAI is raisedduring the course of year. The 2012 FAI target was hiked twice from Rmb580bn toRmb630bn and the 2013 FAI target was hiked from Rmb650 to Rmb660bn. Railwayconstruction in the western region of China will be the priority in 2014. Cargo and passenger transport reform will continue in 2014 Market focus will still be the theme for rail transport reform in 2014. CRC requests toincrease the profitability of railway business and forecasts 2014 railway passengernumber to reach 2.27bn (+10% yoy) and cargo volume to reach 3.28bn ton (+2%yoy). Although no tariff reform details were discussed during the conference, we expectthis to be materialized shortly to improve profitability. As the CRC only forecasts 2%yoy cargo volume growth, we believe this target should have incorporated the impactof cargo tariff hike in near future. Confirming the railway overseas strategy CRC intends to increase international cooperation on railway planning, construction,and operation, establish Chinese railway brands and increase Chinese railway companycompetitiveness, which should benefit rolling stock and construction players. Neutral for railway equipment and construction; positive for operators As the total FAI target is below expectations, we think rolling stock and constructionplayers will have limited near-term upside. But railway operators should benefit fromcontinuous railway transport reform and potential tariff reform. Daqin Railway andGuangshen Railway remains our sector top picks.