hsr
High-speed railroad themed plays were hit by recent mishaps and delays in the massive project.  Photo: Ministry of Railways

Translated by Andrew Vanburen from a Chinese-language piece in 21 CN

SPRING IS USUALLY a time of renewal and hope.

But 204 Chinese listcos – or just under 10% of the 2,111 total listed firms in Shanghai and Shenzhen – are not feeling any spring in their step.

This batch of listcos has already warned on potential downturns for the first quarter.

The beginning of the January-March quarter reporting season officially gets underway on April 10 for Shanghai- and Shenzhen-listed enterprises.

But already these 204 listcos have issued profit warnings, pointing to anything from downside effects from new debt, to overleveraging from recurring debt and less-than-anticipated revenue growth.

High-speed Rail’s Slow Start

Much of the blame for the rash of listed firms warning about weaker-than-expected first quarters can be placed on disappointing progress to the country’s bold rail system expansion.

erju
Engineering firm China Railway Erju (SHA: 600528) will see first quarter earnings drop by over 50% year-on-year.  Photo: company

By the middle of last year, Mainland China already possessed the most extensive high-speed real (HSR) system, approaching nearly 10,000 km in total track length, with over a third of this with top speed of 300 km/hr.

And at the time, many analysts were expecting the PRC to have more HSR tracks than the rest of the entire world combined.

But then came a series of accidents, mishaps, delays and expensive safety overhauls which took a lot of the steam out of the massive program’s momentum.

And as can be seen from the partial list of firms below, those with even a slight exposure to the country’s rail network expansion have been hit especially hard.

According to data collected by Hexin Flush Information (SZA: 300033) -- a provider of online financial data – a total of 46 A-share listed firms will be swinging to a quarterly net loss for the period including the following notables: smart card play, Wuhan Tianyu (SZA: 300205); battery chemical maker Beijing Easpring (SZA: 300073); digital TV tech firm AVIT Ltd (SZA: 300264); Dalian Insulator Group (SZA: 002606); Tianjin Printronics Circuit Corp (SZA: 002134); Guangdong Ronsen Super Micro-Wire (SZA: 002141); Zhejiang Mizuda Printing & Dyeing (SZA: 002034) and battery chemical maker Xiangtan Electrochemical (SZA: 002125).

The same research outfit said a total of 30 A-share listed firms will be once again reporting a year-on-year net loss for the quarter including: security equipment maker Shenzhen Jieshun Science and Tech (SZA: 002609); debt restructuring and asset reorganization Guangdong Sunrise Holdings (SZA: 000030); SUSINO Umbrella Co (SZA: 002174); Guilin Layn Natural Ingredients Corp (SZA: 002166); luxury landscaper Beijing Orient (SZA: 002310) and biometric security firm Chengdu Santai Electronic (SZA: 002312).

In addition, 79 listcos will see their first quarter earnings drop by over 50% year-on-year, including: engineering firm China Railway Erju (SHA: 600528); environmental monitoring equipment maker Hebei Sailhero (SZA: 300137); Ingenic Semiconductor Co (SZA: 300223); Sansteel MinGuang Co (SZA: 002110); spandex play Yantai Tayho Advanced Materials (SZA: 002254) and Zhejiang Yatai Pharmaceuticals (SZA: 002370).

Finally, some 49 A-share listed firms will see their first quarter earnings fall by up to 50% on a year-on-year basis, including: electrical transformer maker Qingdao TGOOD (SZA: 300001); glass insulator play Zhejiang JinLiHua Electric (SZA: 300069); Beijing Ultrapower Software (SZA: 300002); microcontroller and microprocessor maker Wuhan P&S Information Tech (SZA: 300184); Xuchang Yuandong Drive Shaft Co (SZA: 002406) and Guangdong Alpha Animation and Culture Co (SZA: 002292).

The China Stock Digest describes Chinese A shares as thus: A shares refer to companies that have been incorporated in the mainland of China. These shares are then traded on the Chinese stock markets. A shares have seen a tremendous amount of growth as international interest has skyrocketed in the past few years. Part of the reason for this was due to the slow removal of some of the restrictions placed on the A shares for foreign investment, while another reason is the steady increase of the Chinese economy. A shares are currently quoted to investors as Renminbi, with a limited current investor pool. Mainlanders and a few select institutional investors are permitted to trade China’s A shares. In some cases under a regulated structure known as the Qualified Foreign Institutional Investor System (QFII), foreign investors are permitted to purchase A shares in China.

See also:

PRC Funds Lose 500 Billion Yuan, 2nd Worst Year Ever

WILD WEST? 19 Of 34 Chongqing Listcos Under Scrutiny

China AMC's Top Manager Having Rough Year

Star China Fund Manager Upbeat On 2012


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