Shenwan Hongyuan Group: Gives China Railway (00390) a "buy" rating, optimizing reports and leveraging the resource sector to drive valuation recovery.

Shenwan Hongyuan Group released a research report stating that they are initiating coverage on China Railway (00390) with a "buy" rating. The infrastructure investment in 2026 is expected to remain stable due to the progress in local government debt financing and support from central government "double focus" projects. The marginal improvement in new signed orders, with a 3.7% year-over-year growth in the first three quarters of 2025, and the continued strength in the resource sector with mineral resource business revenue of 6.223 billion yuan in the first half of 2025 (+8.04%), make the stock attractive with a dividend yield of 5.1%. The company is enhancing investor returns through the "Valuation Enhancement Plan". The main points from Shenwan Hongyuan Group are as follows: Industry investment in 2026 is stable, with support in total volume Since the beginning of the year, the growth rate of fixed asset investment has slowed down, putting pressure on infrastructure, manufacturing, and real estate. Looking ahead to 2026, investment is expected to stabilize with the orderly progress of local government debt financing and the implementation of central government "double focus" projects. Some sub-sectors are expected to receive higher investment elasticity along with national strategies. The company's new signed orders have improved marginally, with optimized structure and sufficient backlog orders to ensure long-term steady growth The company's cumulative new signed contracts from 2021-2024 and in the first three quarters of 2025 were 2.73 trillion, 3.03 trillion, 3.10 trillion, 2.72 trillion, and 1.58 trillion respectively, with year-over-year changes of +4.7%, +11.1%, +2.2%, -12.4%, and +3.7%. The marginal improvement in new signed orders was observed in the first three quarters of 2025. The breakdown of new signed contracts shows that in the first three quarters of 2025, engineering construction new signed contracts were 1.07 trillion, down by 1.9% year-on-year, emerging business new signed contracts were 220.2 billion, up by 4.3% year-on-year, and asset management new signed contracts were 151.2 billion, up by 108.6% year-on-year. Traditional infrastructure has faced pressure due to industry factors, but the company's new business areas are expanding smoothly. As of the end of the third quarter of 2025, the company's backlog orders were 7.54 trillion (the total operating income of the company was 1.16 trillion in 2024), ensuring long-term steady growth. The resource sector continues to strengthen, enhancing profit elasticity and counter-cyclicality The company's resource utilization business focuses on the operation and development of mines, with the company's reserves of copper, cobalt, and molybdenum leading the industry domestically. The revenue... The H-share discount is significant, with a more attractive dividend yield in the Hong Kong stock market In 2025, the company has formulated and passed the "Valuation Enhancement Plan" to further improve the company's quality, enhance investor returns, and increase the company's investment value. As of December 23, 2025, the China Railway A-share PE (TTM) / PB valuation ratios were 5.4X / 0.42X, and the H-share PE (TTM) / PB valuation ratios were 3.6X / 0.30X, with H-shares significantly discounting A-shares. From a dividend perspective, the cash dividends distributed by China Railway in 2021-2024 and the first half of 2025 were 4.85 billion, 5.0 billion, 5.2 billion, 4.4 billion, and 2.02 billion, accounting for 17.5%, 15.8%, 15.5%, 15.8%, and 17.1% of the net profit of the shareholders of the listed company for the current period. The dividend for 2024 corresponds to a current A-share dividend yield of 3.3% and an H-share dividend yield of 5.1% (based on the closing price on December 23, 2025). Risk Warning Economic recovery lower than expected; new signed orders lower than expected; and PPP cash repayment lower than expected.