A CSR high-speed intercity train pulls out of a railway station in Shanghai. The company aspires to win the top spot in the global high-speed train market in three years. Qilai Shen / Bloomberg

The train firm eyes bigger slice of high-speed locomotive market

China South Locomotive & Rolling Stock Corporation Ltd (CSR), the largest high-speed train maker on the mainland, said Friday that it seeks to boost its revenue to 100 billion yuan in 2012 and 150 billion yuan in 2015 from 45.6 billion yuan in 2009.

The company said it now eyes a bigger slice of the global high-speed train market as it aspires to win the top spot in three years' time.

"In terms of revenue, we are among the world's three largest locomotive producers, but we want to be the industry leader by 2012," Chairman Zhao Xiaogang said Friday while briefing the media on the company's recent achievements as well as its short-term strategies.

In 2009, the company's revenue grew by 30 percent to 45.6 billion yuan, helping it record a compound annual growth (CAG) of 30 percent for the period between 2007 and 2009. Its net profit, which has grown at a CAG of 56 percent, totaled 2.1 billion yuan in 2009.

This year the company is almost set for a brighter result. The first three quarters of 2010 saw its revenue jump 46.8 percent to 43.1 billion yuan from a year earlier, as its net profit soared 73.8 percent to 1.8 billion yuan.

The management cited technology as the one "great driver" of the growth. CSR was the major supplier of metro vehicles that served some of the most important events, including the 2008 Olympic Games, Shanghai Expo and the recently-concluded Guangzhou Asian Games .

The company's newest generation of trains set a record speed of 486.1 kilometers an hour in trial run conducted on Friday morning.

Well-placed among the players with technology means that the company is also aided by the Central Government's strong support in the development of its high-speed railway systems.

"China stands at the forefront of the global high-speed rail sector, with longer high-speed railways than any other country," said Zhao.

The overall length of the high-speed railways in China now stands at 7,000 kilometers, compared with Japan and France (2,000 kilometers) and Germany (1,000 kilometers).

The Central Government is now keen to see that it goes further to 13,000 kilometers by 2012 and 16,000-17,000 kilometers by 2020.

"An integrated high-speed rail network has yet to take shape in China. But once it happens as we expected in 2012, we will see a multiple growth of the company's profitability," Zhao noted.

Besides being able to sit more passengers, the fully-fledged network will also help increase the freight capacity, which now meets only 30 percent of the market demand, the chairman added.

Currently, CSR's gross profit margin stands around 16 percent, something the company seeks to maintain in the long run.

"Generally, profitability of the utilities sector shows a long-term trend of being stable," Bai Bingyang, analyst at CSC Securities, told China Daily. But the rate of return is likely to be an issue that will concern companies like CSR.

"Passengers who wish to travel by a high-speed train tend to be scared away by expensive fares," Bai noted. "But given the huge costs to build a high-speed railway, less passenger traffic as a result of more expensive fares will hurt their rate of return."

China Daily

(HK Edition 12/04/2010 page3)