OCBC Investment Research
Date of Report: 19 September 2025
China Railway Group and Peers: Outlook, Valuation, and Financial Deep-Dive for 2025
China’s Infrastructure Giants: Navigating Volatility and Pursuing Quality Growth
Executive Summary: Investment Thesis & Market Context
China Railway Group (CRG), a leading state-owned construction enterprise, faces a complex operating environment in 2025 as China pivots towards high-quality growth. With infrastructure investments remaining a key counter-cyclical policy in the face of slower economic growth, CRG and its peers are recalibrating strategies to focus on profitability and cash flow. Despite near-term headwinds, including weaker-than-expected earnings and domestic budget constraints, the group retains its position as a core beneficiary of both domestic and Belt and Road infrastructure demand.
Key highlights for the period include:
- Strong overseas revenue growth in 1H25.
- Flattish revenue guidance of CNY1.1 trillion for FY25.
- Stricter cost controls and lower financing costs support margin recovery.
The report assigns a BUY rating, reflecting expectations for total returns in excess of 10% over a 12-month horizon.
Order Momentum and Financial Performance: 1H25 Review
CRG’s Stock Performance and Earnings
- CRG’s H- and A-shares fell 5% and 13% year-to-date, underperforming the MSCI China Index (+36% YTD).
- 1H25 revenue declined 5.9% YoY to CNY512.5 billion, primarily due to a 7.5% drop in infrastructure construction.
- Net profit attributable to shareholders dropped 17.2% YoY to CNY11.8 billion, missing market expectations.
- New orders in 1H25 totaled CNY1.1 trillion, up 2.8% YoY—driven by robust overseas growth (+51.6% YoY) offsetting a 1.2% domestic decline.
- 2Q25 saw a rebound in new orders (+20% YoY), reversing a 9.9% contraction in 1Q25.
Looking Ahead: FY25 Guidance and Catalysts
- Management targets CNY2.8 trillion in new orders for FY25 (+3% YoY vs. -12.4% in FY24).
- Revenue is guided to remain flattish at CNY1.1 trillion.
- Margin recovery anticipated through cost discipline and lower financing costs.
Potential upside catalysts include faster order growth, increased fiscal stimulus from the government, and unlocking the value of existing assets.
ESG and Governance: Opportunities and Shortfalls
- CRG scores below industry average in Governance and Health & Safety, with no clear incident reduction targets.
- Projects include sustainable infrastructure such as wastewater treatment and green-certified properties.
- These initiatives position CRG to capitalize on rising demand for sustainable infrastructure solutions.
Key Risks: What Investors Should Watch
- Margin pressure from higher raw material costs and potential working capital stresses due to payment delays.
- Political and economic uncertainty linked to overseas projects, especially in developing countries.
Peer Comparison: Valuation Analysis
| Company |
P/E (FY25E) |
P/E (FY26E) |
P/B (FY25E) |
P/B (FY26E) |
EV/EBITDA (FY25E) |
EV/EBITDA (FY26E) |
Dividend Yield (FY25E) |
Dividend Yield (FY26E) |
ROE (FY25E) |
ROE (FY26E) |
| China Railway Group Ltd (601390.SS) |
5.1 |
5.0 |
0.4 |
0.4 |
10.9 |
10.4 |
3.4% |
3.7% |
7.2% |
7.0% |
| China Railway Construction (601186.SS) |
4.9 |
4.7 |
0.3 |
0.3 |
10.3 |
9.6 |
4.3% |
4.6% |
6.4% |
6.4% |
| China Comm. Construction (601800.SS) |
6.3 |
6.0 |
0.4 |
0.4 |
16.6 |
15.6 |
2.9% |
3.1% |
7.0% |
6.9% |
Company Overview: China Railway Group
Business Model & Operational Scope
- CRG is a fully-integrated construction conglomerate with core expertise in railway infrastructure, urban transit, and highways.
- Operations span construction, survey/design, equipment manufacturing, property development, materials trading, and mining.
- Significant market share in China’s domestic railway and urban transit sectors.
- Infrastructure investment often surges during economic downturns, with new orders typically stronger in periods of weaker growth.
- Public-private partnerships are used to alleviate funding pressures on local governments.
- Operating cash flow is seasonally weakest in Q1 and Q2, improving in the latter half of the year as payments are received.
FY24 Revenue and Profit Breakdown
| Segment |
Revenue (%) |
Pre-tax Profit (%) |
| Construction |
83.3 |
81.0 |
| Property Development |
4.0 |
-5.6 |
| Others |
12.7 |
24.6 |
Dividend and EPS Trends
| Fiscal Year |
EPS (CNY) |
DPS (CNY) |
| 2020 |
0.96 |
0.170 |
| 2021 |
1.04 |
0.196 |
| 2022 |
1.20 |
0.200 |
| 2023 |
1.29 |
0.210 |
| 2024 |
1.09 |
0.178 |
China Railway Group: Detailed Financials
| Metric |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
FY2024 |
| Revenue (CNY m) |
974,749 |
1,073,272 |
1,154,359 |
1,263,475 |
1,160,311 |
| Gross Profit (CNY m) |
93,848 |
107,267 |
113,362 |
127,379 |
114,532 |
| Net Profit (CNY m) |
25,188 |
27,618 |
31,273 |
33,483 |
27,887 |
| Basic EPS (CNY) |
1.0 |
1.0 |
1.2 |
1.3 |
1.1 |
| Gross Margin (%) |
9.5 |
9.2 |
9.2 |
9.5 |
9.2 |
| Net Profit Margin (%) |
2.4 |
2.2 |
2.3 |
2.4 |
2.2 |
| ROE (%) |
8.4 |
7.2 |
7.1 |
9.93 |
7.78 |
| Effective Tax Rate (%) |
18.37 |
18.93 |
17.89 |
18.31 |
20.87 |
| Dividend Payout Ratio (%) |
18.69 |
18.91 |
16.67 |
16.22 |
16.39 |
| Total Debt/EBIT |
8.61 |
9.02 |
10.85 |
9.96 |
12.88 |
| Net Debt/Equity |
0.83 |
1.08 |
1.27 |
1.23 |
1.35 |
Conclusion: Navigating 2025 and Beyond
China Railway Group and its listed peers remain central to China’s infrastructure ambitions. While near-term earnings softness and domestic headwinds have weighed on share performance, robust overseas growth and a focus on margin recovery underpin a resilient outlook. Investors should monitor order momentum, fiscal policy shifts, and execution on sustainable infrastructure as key drivers for 2025.
OCBC Investment Research maintains a BUY rating for CRG, reflecting confidence in the company’s ability to deliver recovery and sustainable returns in a challenging but opportunity-rich market.
