From January to September of 2006, the indicators of railway transportation kept a rapid growth trend. The freight traffic volume, freight turnover volume, and passenger turnover volume were 2.135 billion tons, 1.6 trillion tons/km and 518.9 billion persons/km respectively, up by 7.3%, 5.5% and 9.3% compared to the same period of last year separately.

Indicators of Railway Transportation, Jan-Sep 2006

Chinese Railway Program of the Eleventh Five-Year Plan was officially released on Oct 26th, 2006. Constituted by Ministry of Railways based on China's Eleventh Five-Year Plan (Outline) and Medium and Long term Railway Network Plan, it put forward main goals of railway development and six major tasks clearly.

Backward railway industry has become one of the main bottlenecks restricting China's economic development. The Eleventh Five-Year Plan comprehensively narrated that China would attach great importance to the construction of railway. Investment in railway infrastructure is planned to be as high as RMB 1.25 trillion, and the annual investment will be about RMB 250 billion, much higher than the average annual investment of RMB 50-60 billion in the past several years. Railway operating mileage will accelerate its growth speed. Its CAGR during the Eleventh Five-Year Plan period will be nearly 4.17%, increasing much more compared to the CAGR of 1.53% from 1978 to 2005. Meanwhile, another 7,000 km Passenger Dedicated Lines (PDL) will be constructed, the great potential of high speed railway development is clear. From January to September of 2006, fixed assets investment in railway industry is up by 107% over the same period of last year. It will maintain the rapid growth from 2007 to 2010. Rapidly increasing investment has become the biggest driving force of the development of railway industry.

The sharp increase of fixed assets investment gives birth to huge driving effects for industries such as auto parts, passenger vehicle & truck manufacturing, and engineering machinery manufacturing, etc. Related enterprises especially hi-tech and leading enterprises in the industry will achieve favorable operating performance in the future.

2 Booming of Railway Equipment Manufacturing Industry
2.1 Midstream Industry of the Railway Industry Chain
2.2 Profit Increases and the Booming of the Industry

3 Major Sub-Industry Analysis of Railway Equipment Manufacturing Industry
3.1 Auto Parts Industry-Upgrade Leads to the Increase of Revenue and Profit Margin
3.1.1 Revenue Increase Mainly Attributed to Parts Upgrade
3.1.2 Parts Upgrade Improves the Profit Margin
3.1.3 Limited Capacity Growth of Domestic Axle Market in 2007 and the Demand would continually expand in 2008
3.2 Truck Manufacturing Industry-Demand far behind the Development of Auto Parts Industry
3.2.1 Competitive Pattern Will Be Stable in the Coming Years
3.2.2 Reconstructed Truck is the Main Product in 2007 and the Demand will be released in 2008
3.2.3 Lower Growth Rate of Revenue Compared to that of the Parts Industry
3.3 Passenger Vehicle Manufacturing Industry-Leading Manufacturers Will Be Hi-tech Manufacturers
3.3.1 Separation of Passenger Vehicle from Truck Brings More Opportunities
3.3.2 Stable Competitive Pattern
3.3.3 Leading Manufacturers Will Be Hi-tech Manufacturers

4 Analysis of Listed Companies
4.1 Jinxi Axle Company Limited
4.2 Times New Materials Technology Co., Ltd