Company overview

The company is the leading supplier of railway fastener system in China's railway industry. Founded in 2001, mainly produces railway fastener system products and flux-cored wire. Based on revenue for the year ended December 31, 2015, the company is the largest supplier of railway fastener systems in China, accounting for about 17.1% of the Chinese railway fastener system market, according to Frost Sullivan. The company has developed into one of the few railway fastener system manufacturers in China capable of producing core components of railway fastener systems, ranging from high-speed railway and heavy-haul railway series to traditional rail series and urban railway transportation series.

By the end of 2015, the company had achieved revenue of 907.0 million yuan, with a CAGR of 22% in the past three years, with a net profit of 228.1 million yuan and a net interest rate of 25.1%. Over the past three years, the sales price and bid winning rate of the company's products have been relatively stable, while the proportion of high-profit products in the sales structure has been increasing, superimposed by the falling steel prices of raw materials, which has increased the gross profit margin from 32.7% in 2013 to 43.0% in 2015.

Industry status and prospects

The market of railway fastener system can generally be divided into four sectors, namely, high-speed railway (accounting for more than 50%), urban railway transportation series, traditional track and heavy-haul railway. It is expected that the projected growth of China's railway fastener system and parts market will be driven by increased demand for high-speed rail, urban rail transport and heavy-haul railways. According to Frost Sullivan, the overall market for fastener systems and parts for high-speed rail, urban rail transit and heavy-haul railways is expected to grow by 10.8 per cent, 15.3 per cent and 3.6 per cent respectively between 2016 and 2020.

The barriers to entry in the railway fastener system industry are relatively high. At present, only six domestic companies and one foreign-funded enterprise are qualified suppliers of high-speed railway fastener systems. Overall, the railway fastener system market is relatively concentrated, with the top ten railway fastener system suppliers accounting for about 81.2% of the total market in 2015.

Advantages and opportunities

The company is one of the seven high-speed railway fastener system suppliers in China that have obtained the product certification of China Railway Inspection and Certification Center, with the highest market share.

The competition in the industry is relatively mild and the barriers to entry are high.

The company can fully enjoy the new opportunities brought about by the expansion of China's railway industry, the high growth of urban track construction and the maintenance and upgrading of railway fastener systems.

Weakness and risk

The company's business is focused on specific categories, mainly railway fastener systems, with a single business risk.

Risk of losing key customers or significant changes in relationships with key partners.

Valuation

The IPO price corresponds to a price-to-earnings ratio of 10.50-13.09 times for fiscal year 2015 and a price-to-book ratio of 1.64-1.86 times. Give IPO a dedicated rating of "5".