BJ-SH High Speed Railway (601816.SS): Model Update; Maintain Buy on Strong FCF, High Profitability, and Trough Valuation

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BJ-SH High Speed Railway (601816.SS): Model Update; Maintain Buy on Strong FCF, High Profitability, and Trough Valuation

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16 Jul 2026 07:00:23 ET │ 15 pages

BJ-SH High Speed Railway

(601816.SS)

Model Update; Maintain Buy on Strong FCF, High Profitability, and

Trough Valuation

CITI'S TAKE Buy

Price (16 Jul 26 15:00) Rmb4.740We are updating our model of BJ-SH HSR (High Speed Railway), trimming

our 2026/27E earnings forecasts slightly by 4%/4% respectively as we lower Target price Rmb6.000↓

our GPM forecasts for these two years to reflect rising COGS, in particular from Rmb6.700

transportation mgmt. fee. We also lower our DCF-derived TP by ~10% to

Rmb6.0 (from Rmb 6.7) and also introduce 2028E estimates with this Expected share price 26.6%

update. We maintain our Buy rating on BJ-SH HSR given the railway return

operator’s strong FCF, high profitability and trough valuation. Potential Expected dividend yield 2.1%

positive share price drivers include: 1) GPM upside due to up to 20% train

Expected total return 28.7%ticket price hike and 2) Strong railway passenger traffic during the summer

peak season. We prefer the railway operator BJ-SH HSR over equipment Market Cap Rmb231,908M

maker CRRC (1766.HK). With this note, we transfer the coverage of BJ-SH US$34,259M

HSR from Jamie Wang to Andy Li.

Valuation — Our Target Price of Rmb6.0 is derived from a DCF model, a valuation

method typically used for infrastructure operators as it captures long-term growth Price Performance

potential and is suitable for stable cash flow. Our DCF model is based on the present (RIC: 601816.SS, BB: 601816 CH)value of FCF generated till FY35E with a WACC assumption of 7.2% (risk-free rate of

1.7%, beta of 0.55, risk premium of 10.0%, pretax cost of debt of 3.5%, effective tax