Shenwan Hongyuan Group Co., Ltd. initiated coverage on CHINA RAILWAY (00390) with an "Overweight" rating, projecting stable infrastructure investment in 2026 supported by local government debt resolution and central "dual-key" projects. New contract signings showed marginal improvement, rising 3.7% YoY in the first three quarters of 2025. The resource segment continued to gain traction, with mining revenue reaching RMB6.22 billion (+8.04% YoY) in H1 2025. The stock’s 5.1% dividend yield is attractive, and the company’s "Valuation Enhancement Plan" aims to boost investor returns. Key insights include:

**1. Industry Investment Stability in 2026** Despite slowing fixed-asset investment growth in 2025 across infrastructure, manufacturing, and property sectors, 2026 investment is expected to stabilize as local governments advance debt restructuring and central "dual-key" projects unfold. Certain sub-sectors may benefit from national strategic priorities.

**2. New Contract Momentum and Structural Optimization** CHINA RAILWAY’s cumulative new contracts for 2021–2024 and Q1–Q3 2025 were RMB2.73T/RMB3.03T/RMB3.10T/RMB2.72T/RMB1.58T, with YoY growth of +4.7%/+11.1%/+2.2%/-12.4%/+3.7%, respectively, reflecting Q1–Q3 2025 recovery. Segment-wise, engineering contracts dipped 1.9% YoY to RMB1.07T, while emerging businesses grew 4.3% (RMB220.2B) and asset operations surged 108.6% (RMB151.2B). The order backlog stood at RMB7.54T by Q3 2025 (vs. 2024 revenue of RMB1.16T), ensuring long-term growth.

**3. Resource Segment Boosts Profitability** Focused on mining operations, CHINA RAILWAY leads in domestic reserves of copper, cobalt, and molybdenum. Mining revenue for 2021–2024 and Q1–Q3 2025 was RMB5.96B/RMB7.50B/RMB8.37B/RMB8.16B/RMB6.22B, with H1 2025 gross margin at 59.45%. Output of copper/cobalt/molybdenum in H1 2025 was 148.8K/2.8K/7.1K tons (-0.92%/-0.25%/-7.54% YoY).

**4. H-Shares Discount and Dividend Appeal** Under its "Valuation Enhancement Plan," CHINA RAILWAY aims to improve quality and investor returns. As of December 23, 2025, its A-shares traded at 5.4x P/E (TTM) and 0.42x P/B, while H-shares were at 3.6x P/E and 0.30x P/B, reflecting a steep discount. Dividends for 2021–2024 and H1 2025 totaled RMB4.85B/RMB5.00B/RMB5.20B/RMB4.40B/RMB2.02B, representing 17.5%/15.8%/15.5%/15.8%/17.1% of net profit. Based on 2024 payouts, A/H-share yields were 3.3% and 5.1%, respectively.

**Risks**: Economic recovery lag; contract signings shortfall; PPP repayment delays.