CSR Corp. (1766) and China CNR (601299) Corp., the nation’s two biggest trainmakers, won bids for 258 bullet trains worth as much as 44.3 billion yuan ($7.3 billion) as China’s high-speed rail network opens new lines.
CSR estimated it won bids totaling 25.9 billion yuan to make 83 bullet trains with maximum speeds of 350 kilometers per hour (217 miles per hour) and 78 trains with maximum speeds of 250 kph for state-owned China Railway Corp., it said in an e-mailed statement late yesterday, citing calculations based on previous bidding prices.
The purchase is the second large order placed this year by China Railway, operator of the nation’s train network, as it builds more railroads to help boost the economy. It started a trial run of a new line linking the cities of Xiamen in Fujian province and Shenzhen in Guangdong province earlier this month.
“Demand for bullet trains will remain strong next year as China opens more new lines,” said Xu Minle, a Shanghai-based analyst at Bank of China International Ltd. He said the amount of the order was in line with his expectations .
We expect firm earnings rebound for Midas in FY14F as highspeed railway (HSR) contracts roll in. Midas won its first HSR contract (Rmb168m) in over two years in October, as China resumed its HSR development programme, with more likely to come.
We believe the Group could win a substantial order
arising from the recent second rolling stock tender for 314 train sets, or about 2,500 train carriages. Over the next two years, we believe a further 700 over train sets could be tendered for, resulting in further wins for Midas in the HSR segment. At the same time, we expect (PRC) metro orders to continue flowing in, and overseas orders, which have grown substantially in 2013, to continue to be robust as Midas looks to maintain a more diversified earnings base.
Maintain BUY, with our 12-month TP raised to S$0.64 (Prev S$0.60), based on 1.2x FY14F P/BV. We believe current valuations are attractive for a stock whose earnings are poised for a strong rebound into FY14F and FY15F.
