公路到铁路的转换将如何影 响中国的货运

1、 cGlobal Research14 January 2019EquitiesChina IndustrialRobin XuAnalyst S1460511010012 HYPERLINK mailto:bin.xu bin.xu+86-213-866 8872Phyllis WangAnalyst S1460517100001 HYPERLINK mailto:phyllis.wang phyllis.wang+86-213-866 8964Wei ShenAnalyst S1460518060001 HYPERLINK mailto:wei.shen wei.shen+86-213-8

2、66 8897Katharine JiangAssociate HYPERLINK mailto:katharine.jiang katharine.jiang+86-213-866 8954China IndustrialsHow will highway-to-railway conversion affect freight transportation in China?H2R conversion: positive for railways; negative for HDTs and toll roadsUsing our proprietary bottom-up approa

3、ch to analyse the change from highways to railways (H2R) to move bulk commodities (e.g. coal and iron ore), we came to three key conclusions: 1) the government can reach its 2017-20 target of a 30% volume increase in railway freight; 2) this would equal turnover growth of more than 20% for railways;

4、 and 3) the decrease in highway turnover would be less than 10%. As these occur, we would expect Chinese railway companies (construction, equipment, and operators) to benefit most, while heavy-duty truck (HDT) makers and toll-road operators may suffer.Impact on railway freight turnover overlooked du

5、e to complexity of analysis We think investors have overlooked the potential impact from the governments railway freight volume incremental target, as it is difficult to quantify, especially as regards freight turnover. To enable a proprietary analysis of the impact of this, we looked at the transpo

6、rt of coal by different railway lines and the throughput of iron ore by coastal ports. We expect freight turnover by rail to increase 23% in 2017-20E, with the growth rate of coal turnover by rail reaching 37%. This should create more demand for freight transport by rail, as well as for more last-mi

7、le railways and railway equipment.Highways likely to be negatively affected, albeit not as significantly as railways We expect H2R conversions negative impact on highway freight transport to be smaller than its positive impact on railways, both in terms of absolute highway freight turnover as well a

8、s percentage change of total highway freight turnover. However, we feel that the market has not priced in the potential impact to HDT makers, which could decrease sales by 50,000-100,000 in 2020E. Bulk commodity-focussed toll roads could also experience a negative impact from bulk commodities being

9、diverted to railways.Our most-/least-preferred stocks under the themeWe raise our earnings estimates for Daqin Railway and Tielong Logistics, and upgrade Daqin Railway, to Buy, and Tielong Logistics, to Neutral. However, we lower our earnings estimates for Shandong Hi-Speed Company (SDHS) and downgr

10、ade it to Sell. Our most preferred names are Daqin Railway, CRRC A, Zhuzhou CRRC, and CRCC, while our least preferred names are Weichai A and SDHS.Summary of H2R conversion beneficiaries and laggardsNameRic codeMkt cap Rating RatingPTPTPrice (LC)PE (x)P/BV (x)Div. yld (%)ROE (%)EPS growth (USD bn) (

11、old)(new)(old)(new)2019E2020E2019E2020E2019E2020E2019E2020E2019E2020EH2R beneficiariesDaqin Railway601006.SS18.0NeutralBuy8.5210.008.168.38.11.11.06.36.413.312.72%2%CRRC - A601766.SS38.5BuyBuy11.9211.869.0415.313.11.91.73.23.712.813.929%17%CRRC - H1766.HK29.1BuyBuy8.908.897.9411.69.91.41.34.24.912.8

12、13.929%17%Zhuzhou CRRC3898.HK6.7BuyBuy53.4052.8044.6511.79.72.01.71.72.018.118.738%20%CRCC1186.HK19.4BuyBuy12.4012.4011.187.16.10.70.62.52.912.012.510%16%CRG0390.HK21.8BuyBuy8.008.007.497.46.20.80.82.32.812.012.814%19%Tielong Logistics600125.SS1.4SellNeutral7.657.907.1218.517.51.51.51.61.78.68.62%6%

13、H2R laggardsWeichai power- A000338.SZ9.4SellSell6.506.857.9011.314.01.51.54.43.613.710.7-28%-19%SDHS600350.SS3.1NeutralSell4.223.804.4111.012.60.70.73.12.76.55.57%-13%Note: Closing prices as of 11 January 2019.Source: Company data, Thomson Reuters, UBS-S estimates HYPERLINK / This report has been pr

14、epared by UBS Securities Co. Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 28. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectiv

15、ity of this report. Investors should consider this report as only a single factor in making their investment decision.China Industrials SectorUBS-S Research THESIS MAPMOST FAVOUREDLEAST FAVOUREDDaqin Railway, CRRC A, Zhuzhou CRRC, CRCCWeichai-A, SDHSPIVOTAL QUESTIONSQ: How will highway-to-railway (H

16、2R) conversion affect various industrials companies?We expect H2R conversion to help the government reach its 30% railway freight volume growth target during 2017-20. However, we expect railway freight turnover growth to be smaller, at 23% during 2017-20E. Railway companies should benefit from H2R c

17、onversion, while HDT makers andtoll road operators may suffer. HYPERLINK l _bookmark0 moreQ: Will PPP drive significant infrastructure investment in China?Yes. We expect more infrastructure projects (especially highways) to be financed via the PPP model. This should help alleviate the heavy investme

18、nt burden historically borne by local governments. Also, construction companies make higher gross margins from PPP projects than from cash construction. HYPERLINK /shared/d2fr00hvdgUF4 UBS Evidence Lab: what is the market missing in highway investment opportunities? 30/7/2018Q: How significant is th

19、e high-speed railway (HSR) network effect?With the aggressive build-out of a comprehensive integrated HSR network in China, travelling is made easier, whether for business or for leisure. With reduced travelling times between cities, access to tourism, lodging, and gaming is easier, and these sector

20、s benefit; meanwhile railway construction and railway equipment makers benefit directly from the build-out of the HSR network. HYPERLINK /shared/d2rD5YXRcFiIGSy UBS Evidence Lab: how significant is the high-speed railway network effect? 3/7/2018WHATS PRICED IN?Small impact from H2R conversion. Due t

21、o the complexity of analyzing the potential impact from H2R conversion, the market expects only a small impact for both railways and highways. This is shown by only a small share-price reaction since July 2018 when H2R conversion targets were first introduced.UBS-S VIEWPositive on railways, negative

22、 on HDTs and toll roads. We see railway companies (construction, equipment and operators) as major beneficiaries of incremental railway turnovers, while heavy-duty truck (HDT) makers and toll-road operators may suffer from poorer highway turnover.EVIDENCEBottom-up analysis of individual railway line

23、s and ports. We looked at coal transportation by different railway lines and iron ore transportation by coastal ports to make a proprietary analysis of the actual impact.H2R conversion flowH2R Conversion during 2017-2020: Railway freight volume: +30%; turnover:Railway 2017-20 share gain (+)High65348

24、0485CoalVolume (mt)Turnover (bn ton-km)Volume ( 403394Metal ore79Volume (mt) Turnover (bn ton-km)Volume (Others 6060 60Volume (mt) Turnover (bn ton-km)Volume (Source: UBS-S estimates+23%way 2017-20 share loss (-)300H2RRailway operatorbeneficiaries Railway constructionmt)Turnover (bn ton-km)Railway e

25、quipment77H2RToll road operatormt) Turnover (bn ton-km)laggardsHeavy-duty truck 60 mt) Turnover (bn ton-km)China Industrials SectorUBS-S ResearchOUR THESIS IN PICTURESreturn mt 5,0004,0003,689653403604,8043,0002,0001,000Targeted 30% railway freight volume increase is achievable, given the contributi

26、on of coal and metal ore02017 railway freight volumeIncrease in coalIncrease in metal oreIncrease in others2020Erailway freight volumemtOther national railwaysDaqin line BTH region Shaanxi region180100 68432657093918Tanghu line 20130Xinjiang region 30 65Wari line 19 81Tanghu, Shuohuang, and Wari lin

27、es are key drivers for incremental coal to be transported on railwaysMenghua line 60Other private railways Shuohuang line36631304960100 200 300 400 500 600 700 80020172017-20E incrementalmt90 8070605040302010CaofeidianJingtangTianjinHuanghuaQingdaoRizhaoLianyungangOthers0Tangshan port (Caofeidian an

28、d Jingtang) will be the key driver for incremental iron ore on railways2017-20E incrementalm TEU9.0 2.8% 3.0%8.0 7.06.01.5%2.5%2.0%5.04.03.02.01.01.0%1.1%0.9% 1.0%1.1% 1.2%1.5%1.0%0.5%0.0%More containers will be shipped by railways to ports2011 2012 2013 2014 2015 2016 20172020ESea-rail throughputSe

29、a-rail as % of total (RHS)Rmb ton-kmNational railways0.70 Daqin lineShuohuang line0.50 Highway (one-way)Railways are more cost-efficient than highways for81km285kmtransporting freight over long distances0.30 92km 171km231km700km0.10 km 0100200300400500600700800900bn ton-km8,000 7,0006,0005,0004,0003

30、,0002,0001,000-Highway freight turnover: +1%turnover :+23%Railway freight20142015201620172020ERailway freight turnover to increase 23% in 2017-20E, while highway turnover is likely to rise only marginallyRailway freight turnover Highway freight turnoverkm7,000 6,0005,0004,0003,0002,0001,0000A lot of

31、 railway last miles need to be built to stimulate transport of freight by railDownside caseBase CaseUpside casePort connection linesCoal mine special railway linesSteel mill special railway linesOthersChina Industrials SectorUBS-S ResearchEARNINGS, PRICE-TARGET, and RATING REVISIONSFollowing our det

32、ailed analysis of the potential impact of H2R conversions, we expect Daqin Railway, CRRC - A, Zhuzhou CRRC and CRCC to benefit most, while Weichai A and SDHS may suffer.We upgrade Daqin Railway (see our 14 January 2019 note HYPERLINK /shared/d2HnNMaH2zSv5 LINK) from Neutral to Buy as we believe mark

33、et concerns about diversions from newly opened railway lines and the potential closure of Qinhuangdao port for coal transportation are overdone, while its current valuation in terms of dividend yield looks attractive.We also upgrade Tielong Logistics (see our 14 January 2019 note HYPERLINK /shared/d

34、2xenF0Sr9 LINK) from Sell to Neutral as we see it as benefitting from the newly implemented railway freight clearing system, and as its share-price correction over the past 12 months has brought its valuation to what we regard as a reasonable level.We downgrade SDHS (see our 14 January 2019 note HYP

35、ERLINK /shared/d20Wvxx6tPmDMml LINK) from Neutral to Sell as we believe the market has failed to factor in the potential negative impact from H2R conversion to SDHSs core Jinan-Qingdao Expressway, which connects to one of Chinas major bulk commodity ports, Qingdao.We fine-tuned our earnings estimate

36、s on CRCC and CRG (the two dominate the railway construction market in China, with a more than 90% share), as potential revenue/profit from incremental railway last miles is small.On railway equipment makers (see our 14 January 2019 note HYPERLINK /shared/d2QphoXyRHOZmgx LINK). This is to reflect a

37、combination of lower assumptions for freight wagons/locomotives based on our H2R conversion analysis, and higher demand for a new EMU model. Our new EPS forecasts are 13-16% above consensus.Although we revised up our earnings on Weichai A (see our 14 January 2019 note HYPERLINK /shared/d2z5gv2ZNUtT7

38、p LINK) to reflect better-than-expected HDT sales in Q418, we maintain our view that HDT sales have peaked. We estimate an annual HDT sales of 50,000- 100,000 units pa up to 2020 when H2R conversion is strictly enforced. Our view of a decline in 2019 HDT sales is based mainly on excess HDT freight c

39、apacity and a slowdown in property new starts, and does not factor in the potential negative impact from the H2R policy.Figure 1: Earnings, price-target, and rating changesRatingPrice target (LC)Old EPSNew EPSNameOldNewOldNew2018E2019E2020E2018E2019E2020EDaqin RailwayNeutralBuy8.5210.000.960.920.830

40、.970.991.00CRRC - ABuyBuy11.9211.860.460.600.730.460.590.69CRRC - HBuyBuy8.908.890.460.600.730.460.590.69Zhuzhou CRRCBuyBuy53.4052.802.423.444.322.413.313.97CRCCBuyBuy12.4012.401.231.361.581.231.361.58CRGBuyBuy8.008.000.770.881.040.770.881.04Tielong LogisticsSellNeutral7.657.900.330.340.360.380.380.

41、41Weichai power- ASellSell6.506.850.830.630.500.960.700.57SDHSNeutralSell4.223.800.510.450.380.370.400.35Note: Price data as of 11 January 2019. Source: UBS-S estimatesChina Industrials SectorUBS-S ResearchNEAR AND MID-TERM SIGNPOSTSFuture key catalystsA scenario in which H2R conversion progressesJa

42、nuary 20192019 railway working conference2019 railway FAI target set by CRC; flat is good enoughCRC normally sets its railway fixed-asset investment (FAI) target for the year at the January working conference. In general, the initial railway FAI target used to be conservative; hence a flattish YoY t

43、arget is already a good sign.March 20192018 results and results briefingsSupportive guidance from railway, port, toll-road, and truck companiesManagements from railway-related companies and truck companies at their 2018 results briefings will probably provide their guidance for 2019, which may suppo

44、rt our view regarding the potential impact on H2R.April 2019March railway/highway traffic dataRailway freight traffic growth to outpace highway freight traffic growthChinese New Year tends to affect every piece of data in the first two months of the year. But March freight traffic data should provid

45、e a fair YoY comparison, and we expect railway freight traffic growth to outpace highway freight traffic growth from March.June 2019China infrastructure and machinery tourOn-the-ground feedback on how companies are experiencing regarding H2ROur on-the-ground China infrastructure and machinery tour w

46、ill provide a good opportunity to listen to local companies that are reacting to H2R conversion. This will help us understand the progress and potential capabilities to de-bottleneck.August 2019H119 results and result briefingsManagements may start to provide initial outlook for 2020Managements will

47、 be able to start to talk about their initial expectations for 2020, especially as 2020 is the final year set by the government to achieve the H2R conversion target.October 2019HDT dealer tourShrinking orders expected from HDT dealersWe expect the HDT dealer visit to show order weakness for HDTs, es

48、pecially at a time when orders should be rising for winter coal transportation.End-2019Opening of Menghua lineOn-time opening of Menghua line indicates governments commitment to H2R conversionThe Menghua line provides a new railway transportation corridor to bring coal from Inner Mongolia all the wa

49、y to Jiangxi. If this major railway line can be completed as scheduled, we can be more confident about the governments commitment to H2R conversion.China Industrials SectorUBS-S ResearchPIVOTAL QUESTIONSreturn Q: How will highway-to-railway (H2R) conversion affect various industrials companies?UBS-S

50、 VIEWWe expect H2R conversion to help the government reach its 30% railway freight volume growth target during 2017-20. However, we expect growth in railway freight turnover will be smaller, at 23%, during 2017-20E. Railway companies should benefit from H2R conversion, while HDT makers and toll road

51、 operators may suffer.EVIDENCEWe applied a proprietary bottom-up analysis for the transportation of coal, iron ore, and containers by railways. For coal, we broke down our analysis using four major railway transportation trunks (i.e. Daqin, Mengji, Wari, and Menghua) together with a few key regions

52、(e.g. Xinjiang, Shaanxi, Beijing- Tianjin-Hebei, etc.). For iron ore, we went through all major coastal iron ore ports and their connections with steel mills.WHATS PRICED IN?The market still has concerns about whether the governments railway freight volume increase target is achievable; and it also

53、appears to fail to observe the impact from turnover change due to the complexity of analysis, hence it expects only a small impact.H2R conversion to boost freight transport by railWith H2R conversion, we forecast railway freight volume and railway freight turnover will increase 30% and 23%, respecti

54、vely, during 2017-20E, as it is diverted away from highways. We found railway freight transportation to be a more efficient mode of transporting freight than highways in terms of cost and environmental impact.Figure 2: Railway freight volume growthFigure 3: Railway and highway freight turnover growt

55、hmt5,000 Railway freight volume tobn ton-km8,000 4,0003,0002,000increase 30%, or 1,115 mt7,0006,0005,0004,0003,000Highway freight turnover: +1%1,000-20142015201620172020ERailway freight volume2,0001,000-Railway freight turnover: +23%20142015201620172020ERailway freight turnover Highway freight turno

56、verSource: National Bureau of Statistics, UBS-S estimatesSource: National Bureau of Statistics, UBS-S estimatesAccording to the Action Plan for Incremental Freight Transportation of 2018-2020 (Freight Incremental Action Plan), issued in July 2018, China Railway Corporation (CRC) aims to increase rai

57、lway freight volume by 30%, or 1,100mt, from 2017 to 2020. In addition, the State Council has proposed a three-year action plan to improve Chinas air quality, and has outlined several 2020 targets to promote railway transportation.Figure 4: Major freight transportation targetsUnit: mt20172020ChangeR

58、ailway freight volume3,6894,79030%Bulk commodity as % of totalNA90%NA-Coal volume2,1602,81030% of total coal production60%75%15ppts-Ore volume from ports250650160% of land-transported ore volume from ports35%85%50ppts-Container sea-rail intermodal at major portsNANA10% CAGR-Beijing-Tianjin-Heibei &

59、affiliated regionNANA40%-Yangtze River DeltaNANA10%-Fenwei PlainNANA25%Bulk commodity by highway to/from coastal portsNANA-440Waterway freight volume6,6787,1787.5%By end-2018: no truck-loaded coal allowed at major coastal portsBy end-2020: 60% of major coastal port areas to be connected by railways;

60、 80% of industrial & mining enterprises and newly built logistics parks with annual freight volume of more than 1.5m tons to be connected by railways;no truck-loaded ore and coke allowed at major coastal ports;30% CAGR for container multimodal transport from 2018 to 2020Source: CRC, State CouncilHig