Caixin
Sep 09, 2021 06:33 AM
BUSINESS

China Railway’s Cargo Unit Surges 44% on Shenzhen Debut

Dongfeng Motor Corp.’s vehicles being loaded to China Railway Special Cargo’s containers in Xiangyang, Hubei, on Jan. 19, 2021.
Dongfeng Motor Corp.’s vehicles being loaded to China Railway Special Cargo’s containers in Xiangyang, Hubei, on Jan. 19, 2021.

Shares of China Railway Special Cargo Services Co. Ltd. (001213.SZ), the cargo freight unit of state railway operator China Railway Corp., jumped 44% on its debut Wednesday on the Shenzhen Stock Exchange.

The cargo unit was originally a wholly owned subsidiary of China Railway, which sold a 15% stake to six investors in 2019 as part of a push for state-owned enterprise restructuring that led to the public listing.

China Railway Special Cargo raised 1.73 billion yuan ($267 million) from the initial public offering (IPO) by selling 440 million shares at 3.96 yuan each. The stock closed at 5.7 yuan Wednesday.

After the IPO, China Railway remains the controlling shareholder with 76.5%. The six investors together hold 13.5%. Among them, Dongfeng Motor Corp. is the second-largest shareholder and one of the unit’s major clients.

Other investors include BAIC Group, CRRC Capital Management Co., JD Logistic, GLP and China International Marine Containers Group.

China Railway Special Cargo intends to use the IPO funds for logistics and storage bases, special vehicles and equipment for cold chain logistics, and an information platform, according to the prospectus.

The company’s business mainly focuses on automobile shipping and other cargo transport. As of June 30, its net assets totaled 17.5 billion yuan with an assets-to-liabilities ratio of 8.57%. Vehicle freight accounts for nearly 90% of the company’s revenue. China’s vehicle production and sales have shown weakness in the past three years, which may pose a challenge to the company’s outlook.

Benefited from rising rail freight volume in recent years, China Railway Special Cargo has maintained a generally stable financial performance. The company posted a net profit of 353 million yuan on revenue of 8.46 billion yuan in 2020, down from a net profit of 568 million on revenue of 8.65 billion yuan, mainly due to a decline in vehicle delivery amid the pandemic.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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