The entire world is adopting clean energy as nations strive to make the world a cleaner place. Meetings are being held, regulations are being discussed and emissions targets are being set.
We have no doubt that humanity must find clean sources of energy to survive in the long term. But the pace of adoption is slower than most would like. This is especially true in China, which is notoriously polluted and reliant on coal.
Beijing is well aware of this problem and has taken many steps to move toward clean energy. It’s not easy for the world’s second largest economy to shift from coal to wind farms, solar panels, and hydroelectricity over a short period of time though.
Daqin Railway Company Limited (SHA: 601006) is the owner of one of China’s largest rail networks. They’re responsible for transporting coal from mines to power plants.
The firm is aware of China’s heavy reliance on coal over the short and medium term. However, Daqin also understands the shift which will inevitably happen over the long term.
Daqin Railway Stock: Positioned for Now and the Future
The main source of Daqin’s income is its 653km rail network from the coal mining center of Datong to the port city of Qinhuongdao. It’s responsible for transporting over 500 million tons of coal.
Not only did the volume of coal which Daqin transports increase from just 20 million tons in 1995 to 200 tons in 2005. But Daqin uses the monopoly it has to its advantage, gradually increasing their fees over time.
China continues to use more coal every year despite efforts to go green. Resource transportation isn’t Daqin’s only business though. The company’s over 1000km of rail systems in total consists of high-speed commuter rails and general cargo transport. Their reliance on coal continues to decrease.
China Needs Coal, It’s That Simple
China is polluted, everyone knows it, and Beijing especially understands this. With that said, China’s emissions won’t peak until around 2030. Progress takes time in a country so large.
Beijing isn’t ignoring their problems. They’re just realistic about the time it will take to solve them.
Daqin Railway’s long-term business plan is in line with China’s strategic goals. With a low P/E ratio of under 10, a strong dividend yield of above 5%, healthy ROE/ROA, and a growth model supported by economic fundamentals, buying Daqin Railway stock is a good way to invest in China’s growth now that it’s trading below its summer highs.
The recent opening of the Hong Kong-Shanghai Stock Connect lets foreign investors buy shares listed in mainland China for the first time. A brokerage account in Hong Kong is now more useful than ever. It gives access to all companies on the Shanghai Stock Exchange including Daqin Railway stock.
Want to buy Chinese stocks? You might want to look at our analysis of Zhejiang. It’s a major operator and developer of expressways in China.
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