Daqin Railway
Thesis
Daqin Railway is the largest cargo railroad in the world and has recently gained pricing flexibility from the NDRC, allowing it to increase prices for the first time in years. With a strong EBITDA margin and a structural shortage of rail capacity in China, Daqin is well-positioned to benefit from further price hikes, making it an attractive long-term investment.
Did it work?
The long thesis hinged on NDRC pricing flexibility driving price hikes and improving returns, but the stock has fallen 37.3% over 30 months, a severe drawdown that directly contradicts the expected benefit from pricing power. While 30 months is a long enough window for a long-term thesis to show direction, the magnitude of the decline suggests the pricing/capacity thesis did not materialize as expected. Confidence is high given the clear negative return against a bullish thesis.