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Regulator to scan CNR float chart

By Wang Ying (China Daily)
Updated: 2009-08-21 08:05

A woman looks at the train model developed by CNR at an exhibition in Beijing. [CFP]

The free fall seen on the bourses of late has not put off domestic companies from seeking fresh listings, with China CNR Corporation Limited, one of the country's top two train makers, too set to join the initial public offer bandwagon.

The China Securities Regulatory Commission, the nation's stock regulator, will review CNR's IPO application today, sources said.

CNR is reportedly planning to issue 3 billion A shares to raise a total of 6.436 billion yuan($942 million). The capital gathered through the IPO will form no more than 34.09 percent of CNR's total capital.

The Beijing-based train maker said the company would use the money to upgrade technology, such as the development of high-speed trains.

CNR, together with its archrival China South Locomotive & Rolling Stock Corp (CSR), which is listed in both Shanghai and Hong Kong, are the major two train makers in China, altogether taking up more than 95 percent of the domestic market.

"CSR issued a total of 4.6 billion A shares and H shares in 2008. In comparison, CNR's IPO is smaller, which may result from the current pessimistic market sentiment," said Wang Wanjin, an analyst with Donghai Securities.

In recent years, China's railways authority has quickened the upgradation process, and through "technology transfer or partnership with Germany's Siemens, France's Alstom, Canada's Bombardier Inc, and GE of the US, China has been able to produce homegrown railway facilities," said Wang.

Related readings:  CNR on right lines for world rail leadership  Railways holding firm, float mulled  China to spend $731b on railways by 2020  $730b plan to expand railways

CNR made a net profit of 383.75 million yuan during the first half, with earnings per share (EPS) of 0.07 yuan.

The price rise seen for steel and non-ferrous metals, including aluminum and copper, have raised CNR's production cost. The company said the percentage of raw material cost in the total cost increased from 78.51 percent in 2006 to 82.92 percent last year.

CNR is currently an arm of China Northern Locomotive and Rolling Stock Industry (Group) Corporation. Its parent group owns 91.23 percent stake in CNR.

CNR and CSR used to be a single entity earlier, but were split into two in 2000 taking into account geographic considerations. Railway facilities that are located in the south belong to CSR, and those in the north were put under CNR.

China's railway system has been under fast development in recent years. By 2010, 17,000 km of new railway routes will be built, according to the central government planning agency. As the railway boom is ongoing, the two companies do not need to worry about their equipment demand, said Lin Sheng, an analyst with Essence Securities.

China will spend as much as 30 billion yuan in railway facilities, including both cargo and passenger trains, which net CNR and CSR significant gross profits, said Wang.

CNR has appointed China International Capital Corp (CICC), Huatai Securities and Huarong Securities as underwriters and financial consultants for the issue, according to the IPO prospectus.

CNR has 20 subsidiaries, and its products have been widely used in over 40 countries and regions worldwide.