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China Railway bags 5 orders

By Li Fei (China Daily)
Updated: 2009-06-05 10:28

China Railway workers build a railway bridge in Dalian,Liao ning province.[Liu Debin]

China Railway Group has won five railway and light rail orders with a combined value of 10.1 billion yuan, bringing the total amount of contracts awarded to the State-owned rail builder to 200 billion yuan in the past few months.

Analysts said the contracts won so far represent only part of the railway building frenzy embodied in the country's 4-trillion-yuan economic stimulus package announced late last year after the outbreak of the global financial crisis.

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The government hopes the package, including massive expenditure on railway construction, will boost domestic demand to help maintain credible economic growth in the face of shrinking exports.

The total value of the contracts accounted for about 4.31 percent of China Railway's revenues in 2008 according to Chinese accounting standards, China Railway said in a stock exchange filing.

One of its subsidiaries won a contract to build a passenger-only rail between Panjin and Yingkou in Liaoning province, valued at 4.44 billion yuan, the single largest order among the five projects it won, according to the company.

The country's largest railway and highway builder was also awarded a 3.44-billion-yuan order to build a passenger-only railway between Hefei and Bengbu within Anhui province.

It also won a 590-million-yuan contract to build a part of a subway line in Beijing and a 690-million-yuan light rail project in Chongqing.

"The new order intake is slightly better than our expectations and we envisage a 50 percent jump in mid-year earnings," securities house BOC International (China) Ltd said in a note.

China Railway, analysts say, will stand to gain the most in China's push to build more railroads in the coming years and the massive infrastructure boom expected as a result of the 4-trillion-yuan stimulus plan.

China is expected to spend 5 trillion yuan until 2020 to build 41,000 km of new railways and this year alone 600 billion yuan will be poured into railway and related construction projects.

"Infrastructure construction projects, especially in the railway sector, will only accelerate in the next two years," said Xu Yongchao, analyst, China Minzu Securities.

"The abundant orders the company has in hand now means it can guarantee robust revenue and profit growth in the coming years," Xu said.

China Railway shares edged up 1.64 percent to close at 6.19 yuan in Shanghai trading yesterday.

The company's revenue is expected to rise by nearly a quarter to 280 billion yuan this year from about 225 billion yuan in 2008, its President Li Changjin said in April.

The rail builder's net profit rose 76 percent to 1.2 billion yuan in the first quarter, while its revenue jumped 70 percent to 60.1 billion yuan.

The construction giant, however, posted a steep drop in 2008 earnings, dragged down by a 4.1 billion yuan foreign-exchange loss.

The builder is planning to issue bonds to raise 12 billion yuan to fund operations and repay loans.