野村证券NOMUR 66页铁路与建设(含高铁)行业深度研究报告英文

18November2010NomuraNOMURAINTERNATIONAL(HK)LIMITEDANCHORREPORTNomuraAnchorReportsexaminethekeythemesandvaluedriversthatunderpinoursectorviewsandstockrecommendationsforthenext6to12months.Anyauthorsnamedonthisreportareresearchanalystsunlessotherwiseindicated.Seetheimportantdisclosuresandanalystcertificationsonpages61to64.Railways&Infrastructure|CHINAINDUSTRIALS/[e-mail][e-mail]:trackingfinancingRollingoutamodernrailwayinacountrythesizeofChinadoesn’tcomecheaply.TheMinistryofRailway’s(MoR)balancesheethascomeinforincreasingattention,withitsdebtssurpassingRMB1,300bnin2009.Balancingthatoutaretherailway’sbenefitsforregionaleconomies,costefficienciesandtheenvironment,whichweseeaspowerfuldriversofcontinuedinvestment.The“fourvertical,fourhorizontal”projectisjustthebeginning,andweseeChinacontinuingwithrailwayconstructiontoaddresstransportationbottlenecksoverthe12thFive-yearPlan.Besides,weseerelieffortheMoR’sfinancesfurtherdowntheline.WehavestudiedthedevelopmentoftherailwayindustryinJapanandtheUS,whichfacedbankruptcyinthe1970sandturnedprofitableafterreformsinthe1980s.Ourfindingsprovideinsighton:1)whyarailwaycanoperatewithastressedbalancesheet;2)howtorunarailwaywhileunderfinancialpressure;and3)howtoturnaroundthebusiness.Pricederegulation,commercialisation,revenuediversification,sharingoflandappreciationvalue,andusingthecapitalmarketsshouldhelpthenationalrailwayparelossesrelatedtotherailwayrolloutandmakebuildingalarge-scale,high-speednetworkmoresustainable.WeremainBullishonChina’srailwaysector,andpreferequipmentoverconstructionplayersonsteadilyincreasingtraindensityandservice&replacementrevenue.WeakMoRbalancesheetshouldnotbetheonlyfocusOverseasexperiencepointswaytosuccessamidfinancialstressStillBullishonChinarailway,preferequipmentmakersBULLISHStocksforactionWeseerollingstockandcomponentplaysasthebestexposuretothemulti-yeargrowthstoryforChinarailways,givenbettermarginsthanininfrastructureconstruction.Ourpicks:CSR,CNR,CRCC(upfromNeutral).StockRatingLocalpricePricetargetCSRCorp(1766HK)BUY8.7210.50ChinaCNR(601299CH)BUY5.948.20ZhuzhouCSR(3898HK)NEUTRAL26.7028.00CRCC(1186HK)BUY9.8811.80CRG(390HK)NEUTRAL5.946.60DowngradingfromBuy;upgradingfromNeutral;pricingasof15November,[e-mail][e-mail],[e-mail]18November2010Nomura1Railways&Infrastructure|CHINAINDUSTRIALS/[e-mail][e-mail]ActionTheradiationeffectontheregionaleconomy,long-termcostefficiencyandthegreennatureofhigh-speedrailwilllikelydriverailinvestmentsinChina.Therefore,theMoR’sweakbalancesheetandoperatingprofitofthecurrenthigh-speedtrackshouldnotbetheonlyfocus.The“fourvertical,fourhorizontal”projectisjustthestart,andweseeChinacontinuingrailwayconstructiontoresolvetransportationbottlenecksduringthe12thFive-yearPlanperiod.WeremainBullishontherailwaysectorandpreferequipmentmakersoverconstructorsonafatter-taileffect.CatalystsUpwardrevisionstorailwayconstructionplansinthe12thFive-yearPlan.AnchorthemesDespitetheMoR’sweakbalancesheet,webelieverailwayinvestmentwillcontinue,particularlygiventhatChina’scurrentrailwaynetworkisfarfromexcessive.Railbalance:trackingfinancingWeakMoRbalancesheetshouldnotbetheonlyfocusWebelievethe“fourvertical,fourhorizontal”projectwilljustmeetthebasicrailwaytransportationrequirementsinChina.Givenrigiddemandforrailwaytransportation,coupledwiththeradiationeffectonregionaleconomicgrowth,long-termcostefficiencyandthegreennatureofhigh-speedrail,weexpectcontinuedlarge-scalerailwayinvestmentsduringthe12thFive-yearPlanperiod.AlthoughtheMinistryofRailways’(MoR)totaldebtsurpassedRMB1,300bnasof2009,theweakbalancesheetshouldnotbetheonlyfocus,inourview.OverseasexperiencepointswaytosuccessamidfinancialstressWehavestudiedthedevelopmentoftherailwayindustriesinJapanandtheUS,bothofwhichfacedbankruptcyinthe1970sandsubsequentlyturnedprofitableafterreformsinthe1980s.This,inourview,providesinsightfortheMoRintermsof:1)whyarailwaycancontinuetooperatewithableedingbalancesheet,2)howtooperateunderfinancialpressureand3)howtoturnaroundthebusiness.StillBullishonChinarailway,preferequipmentmakersTherefore,despitetheMoR’sweakbalancesheetandpoorcashflow,webelieverailwaynetworkexpansionwillcontinueduringthe12thFive-yearPlanperiod.Newrailwayswilllikelybebuiltinlandaswellasincoastalregionsnotyetpenetrated.Pricede-regulation,commercialisation,revenuediversification,sharingoflandappreciationvalueandusingthecapitalmarketshouldhelpthenationalrailwaytoparelossesfromhigh-speedrailwaysandthusmakebuildingalarge-scalehigh-speedrailwaynetworkmoresustainable.WeremainBullishonChina’srailwaysector.Wepreferequipmentmakersoverconstructionplayers,onalonger-tail,fatter-taileffect.Wethinktraindensitywillgraduallyrampupwiththecompletionoftrackconstruction,andserviceandreplacementrevenuewillfattenupequipmentmakers’bo