Guangshen’s 3Q Slightly Beats; Railway Reform Is Deepening
No-moat Guangshen’s third-quarter result reflects a strong sequential improvement, with net profit rebounding to CNY 380 million from CNY 226 million in the second quarter. This is slightly ahead of our expectations, and largely attributed to lower-than-expected overhaul costs in the quarter, which (along with the seasonally strong passenger tariffs due to school holidays) helped to boost gross margin to 12.2% from 8.8% a quarter ago. However, we think the margin recovery is not sustainable. The...Guangshen Railway Company Limited is engaged in the provision of passenger and freight transportation on railroads. The Company also operates certain other businesses, which include services offered in railway stations, and sales of food, beverages and merchandises on board the trains and in the railway stations. Its segments include The Railway Transportation Business and All other segments. The railroad and related business is conducted by the Company (the Railway Transportation Business). Other segments include on-board catering services, leasing, sales of materials, sale of goods and other businesses related to railway transportation provided by the subsidiaries of the Company. The Company is engaged in the provision of integrated services in relation to railway facilities and technology, commercial trading and other industrial businesses. It also operates with other railway companies in the People's Republic of China (PRC) for the provision of freight transportation services.
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