Guangshen Railway Company Ltd. ADRGSH

Morningstar Rating

Stock Research and Analysis

by Jeremy Cohen

We think Guangshen Railway will continue to enjoy steady revenue growth, given its dominant market position in the Pearl River Delta of southern China, but operating challenges have offset these gains, driving down recent profitability. Nonetheless, Read more

Bulls Say

GR operates exclusively in one of the busiest train routes in China.

The railroad covers one of the most prosperous areas in China, the Pearl River Delta, and demand for railway transportation in the region is expected to continue growing.

The railroad industry is highly regulated by the government in China, creating a high barrier to entry for competitors. Read more

Bears Say

Highway travel by coach or auto may be a threat for GR, as these substitutes offer a more flexible and cheaper way to travel.

GR's growth rate may slow as its railroad is almost fully occupied and tightly scheduled, unless it adds another line or acquires other peers.

The Enterprise Income Tax Law will increase the firm's tax rate annually through 2012, hampering profitability. Read more

Strategy

GR is looking to capture the growing amount of passenger and cargo traffic between Hong Kong and the Pearl River Delta. It strives to promote "as frequent as buses" trains in order to attract more passengers Read more

Management

As a state-owned company, GR may act in the interest of the state instead of investors. Restricted by government policies, GR does not provide competitive compensation, with total compensation for executive and directors in fiscal 2008 amounting to Read more

Profile

Based in Shenzhen, China, Guangshen Railway owns and operates the sole four-track railroad between Guangzhou and Shenzhen as well as a railroad from Guangzhou to Pingshi, Read more

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