China Railway Tielong Container Logistic:H116results missed;we see improvement in H216

Q: How did the results compare vs. expectations

    A: H116 operating revenue/net profit attributable to the parent: Rmb2.91bn/130m, -14%/20% YoY vs. our full-year est. of +1%/3%; the results missed our expectations.

    Q: What were the most noteworthy areas in the results

    A: CRT's profit mainly comes from special containers and railway. In H116, specialcontainer traffic rose 24% YoY (+15% in 2015) but the segment's operating revenueonly rose 2% YoY to Rmb650m due to railway freight rate policies; the segmentrepresented 38% of CRT's gross profit. Railway freight volume fell 4%, narrower thana 15% decline in 2015. But as freight rates were reduced, railway freight operatingrevenue fell 18% YoY and the segment had 37% of CRT's gross profit. We think therailway freight market has mostly troughed, the trend of CRT's special containerbusiness is improving and special container freight rates will likely recover in H216. Webelieve full-year revenue/net profit are likely to post smaller YoY declines than in H116.

    Q: Has the company's outlook/guidance changed

    A: The company's 2016 operating revenue guidance remains Rmb5.8bn.

    Q: How would we expect investors to react

    A: We expect slightly negative reactions from investors.