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December 24, 2009

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Home » Business » Manufacturing

CNR sees light at end of tunnel

CHINA CNR, one of the country's two big train makers, raised 13.9 billion yuan (US$2 billion) in its Shanghai initial public offering, which will be used to ramp up its train making capacity to meet growing domestic demand.

The supplier of bullet trains for the planned Shanghai-Beijing high-speed railway sold 2.5 million shares at 5.56 yuan each, the higher end of its price range of 5 yuan to 5.56 yuan, the Beijing-based company said yesterday in a filing to the Shanghai Stock Exchange.

The fourth-largest IPO in China this year attracted 1 trillion yuan in subscriptions and values CNR at 49.2 times its 2008 earnings per share, according to the filing. This compares with the 34.3 for its rival China South Locomotive and Rolling Stock and the average 32.4 for the benchmark Shanghai Composite Index, Bloomberg News data showed.

Analysts said the valuation of the train maker is reasonable considering China's aggressive plans to expand the country's railway network and subway systems.

The central government planned to pour 5 trillion yuan in the world's fastest-growing major railway market to expand its rail network to a total of 120,000 kilometers by 2020.

"CNR is well positioned to achieve its goal of doubling its revenue to 80 billion yuan by 2011 as the company and China South Locomotive take a combined 95 percent of China's rail vehicle manufacturing market," said Li Jianjian, a Founder Securities Co analyst.

Li forecast CNR is likely to surge about 36 percent on its debut performance based on its reasonable pricing and earnings prospects.

CNR, known as China Northern Locomotive and Rolling Stock Industry (Group) Corp before a reorganization in June 2008, said the proceeds will be used for technical upgrading.


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