China Railway Construction Suddenly Burst Big Losses, Stock Price Crash

Three quarterly bulletin will be announced soon.

Event

Sudden explosion, big loss, stock price crash

China railway construction notice said that the construction of the Saudi Mecca light rail pit project in the implementation process is expected to happen due to the fact that the actual number of projects is substantially higher than that predicted by the contract.

The third quarter profits of China railway construction will be greatly affected. The company has confirmed that if the change and claim matters can not be approved by the owner before the 2010 annual performance report, the project is expected to have a significant impact on the company's 2010 profit.

This loss exceeds the net profit in the first half of the year, equivalent to 6 of the net profit of last year.

Affected by this, China Railway Construction in Shanghai and Hongkong share prices plummeted.

At the same time, the fall of China railway construction also led to the decline of China Railway, China's pportation construction and other stocks.

At the close, A shares quoted 7.59 yuan / share, down 5.24%, H shares 9.63 Hong Kong dollars / share, and plunged 13.71%.

Market reaction

Shareholders appeal for prosecution lawyers say it is difficult to operate

The sudden bad profits made the small and medium-sized shareholders in the "bull market" long term in China's railway construction complain bitterness.

Public information shows that since the listing of China railway construction, its trend has been significantly weaker than the market.

A Chen surnamed investor told reporters that he appealed to other minority shareholders to unite to prosecute China railway construction.

Shareholders questioned why China Railway Construction "in June has known huge losses to continue construction, and did not advance notice"? Insiders know that investors have the opportunity to leave early, while the weak minority shareholders are in the dark, passively bear the pain of falling stock prices.

For the idea of shareholders, Yan Yiming, a lawyer at the Shanghai law firm, told reporters that the prosecution could be established in theory, but in practice, it was difficult for the lawsuit to be operated after the relevant departments believed that the company had issued information illegal and punished.

Institutional rating "overweight" analyst recommendations wait and see

What is intriguing is that after the huge loss news released by China railway construction company, a number of investment bank's analysis reports give "overweight" rating.

Yesterday, Morgan Stanley issued a report that China's iron construction losses were expected to be one-off, believing that the project will be substantially improved, so that the "overweight" rating will be maintained; Citigroup will also be rated as "buying".

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Some investors said that China's iron construction might be a bad match for other funds.

Qiu Bo, an analyst with Guoxin Securities, who has long been concerned about China railway construction, has found that loss is not a glorious matter for such a big enterprise like China railway construction. It is believed that enterprises will not sacrifice the company's performance and image to cooperate with the warehouse.

The company's fundamentals are good. Investors are advised to wait and see for a while.

Company response

Is it possible to recover losses?

Why did the huge losses suddenly appear in the third quarter? For questioning the market, China Railway Construction Investor Relations Department said yesterday that the company had announced the first time when it was informed of the information.

The person explained that the three quarter is the peak of the progress of the project.

In the second half of this year, the project entered the stage of large-scale construction, and all parts of the project were launched in full scale. The actual number of projects was significantly increased than the number of projects expected when signing the contract. In addition, the owners' demand for the project's capacity in 2010 was significantly higher than that stipulated in the contract, the underground pipeline network and landlords and landlords responsible for the project were lagged behind, and the owners had to increase the new functions, a large number of mandatory changes, and some of the completed projects were readjusted.

Whether the loss can be saved? The person said whether the success of the claim is critical depends on whether there is solid evidence for China railway construction. The company has submitted changes and claim information to the other side when each contract changes.

China railway construction notice has submitted the change and claim information to the owner according to the contract. The owner promises to set up a special committee after the completion of the project to discuss the related claim and compensation.

The person said that changes in the progress of the project were normal, and there were precedents. The company has some experience in this area.

This project has great social impact and is highly concerned by the two governments.

Qiu Bo once went to China Railway Construction Research, he also said that the company encountered this situation is not the first time, but the amount is huge.

Another industry insider familiar with the construction industry said: "if the amount of construction increased, if no one signs and endorsement, China railway construction will not blindly do it, and the project owner belongs to the government level. Finally, this project is likely to fail even if it is not good."