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CREC shares peak on order wins

By Wang Ying (China Daily)
Updated: 2010-02-25 09:05

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A worker reinforces steel bars at a China Railway Erju Co, Ltd project in North China. Railway construction companies are set to gain from the rapid development of the country's railway network. [China Daily]

SHANGHAI: Shares of China Railway Erju Co Ltd (CREC), a subsidiary of State-owned China Railway Group Ltd, surged 8.64 percent yesterday to 11.69 yuan after the company said it won four construction projects worth 10.9 billion yuan.

The four projects are the expansion of the Guangxi Coastal Railways in Guangxi Zhuang autonomous region, the building of the North Qingdao Station in Shandong province, construction of a new railway line in the Northeast and a highway in the Southwest.

The 4.64 billion yuan Guangxi project, involving the extension of the railway line from Qinzhou to Beihai, is a joint project with Sichuan Huasun Steel Structure Co Ltd.

The 3.08 billion yuan North Qingdao Station project will be developed jointly with China State Construction Engineering Corp. In the Northwest, CREC will construct the 2.99 billion yuan railway line between Xining and Zhangye along the Lanzhou-Xinjiang sector, while in the Southwest, it is setting up the 215.45 million yuan Huaxi Erdao highway in Guizhou province.

Aided largely by the railway infrastructure construction boom, CREC has signed contracts valued at 13.2 billion yuan this year.

"CREC is the direct beneficiary of the nation's infrastructure construction boom," said Luo Zebing, an analyst with China Jianyin Investment Securities. Last year, China spent nearly 600 billion yuan on railway construction and upgrading, up 79 percent from the previous year, he said.

Luo said China's railway construction boom is expected to continue this year. "Unlike the investment in roads and shipping that saw an abrupt downturn recently, China will continue to expand its railway network, including the 13,000-km high-speed rail network which is scheduled for completion in 2012," said Lin Sheng, an analyst with Essence Securities.

The railway sector has of late been attracting investors across the globe. Legendary US investor Warren Buffet spent $26.3 billion to acquire a 77 percent stake in Burlington Northern Santa Fe Railway last year.

Most railway stocks rose on the Shanghai Stock Exchange yesterday. China Railway rose 1.93 percent to 5.8 yuan, while China South Locomotive & Rolling Stock Corp went up by 2.89 percent to 5.69 yuan. China CNR Corp increased 2 percent to 5.61 yuan.