$1B profit from China’s most profitable HSR

By | July 20, 2016

According to the debt prospectus issued by Tianjin Railway Construction Investment Group, Beijing-Shanghai high-speed railway (HSR), being China’s most profitable HSR , recorded a 2015 net profit of RMB6.6bn (5.0% ROE) or USD1b. Revenue and profit before tax in 2015 were Rmb23.4bn and Rmb6.7bn in 2015, respectively. Total liabilities/total asset was 27.74% as of end-15. The 30% net profit margin is impressive, but the return figure is still too low.  And don’t forget, that’s the most profitable HSR in China, connecting two metropolitan cities: Beijing and Shanghai.  I don’t know the financial situation of other HSRs, but I can give you more color on China HSR’s growth.

From 2008 to 2014, the HSR traffic increased from 128 Millions passengers to 910 Millions passengers, a traffic CAGR of 48%. This growth rate is higher than the 43% traffic CAGR of Japan’s Shinkansen in its first five years of operation. The HSR share of total railway passengers traffic is around 39% in 2014, but the HSR’s share of total railway length is only 14%, which means the HSR has much higher efficiency.  In China’s the 13th five years plan (2016-2020), the government plans to invest RMB3.8 tn in railway construction.  In 2020, China’s railway length should reach 150k km (US’s number was 223k km in 2013), and HSR should reach 30k km, around 20% of total railway length.  Quite impressive!

 

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