Profitable freight unit of Uzbekistan Railways to go under privatisation hammer

By Muzaffar Ismailov in Tashkent September 26, 2023

The government of Uzbekistan has announced the start of  a privatisation process for the sale of a 35% equity stake in Uztemiryulkontainer, one of the most profitable subsidiaries of Uzbekistan Railways. The company operates 21 logistics centres across the country. 

Founded in 2002, Uztemiryulkontainer provides freight forwarding services for export-import, transit and intra-state cargo transportation on the territories of Uzbekistan, CIS countries, Europe and Afghanistan.

According to Avesta Investment Group, Uztemiryulkonteiner is planning to establish a joint venture with Chinese investors to set up logistics hubs at the Uzbekistan border. These initiatives would form part of the larger China-Kyrgyzstan-Uzbekistan (CKU) railroad construction project.

In July, the company discussed possibilities for developing container transportation on the Uzbekistan-Turkmenistan-Iran route with representatives of Iranian company Vision Global Terminal and Turkmen company TULM.

In August, China Railway Beijing Group launched a new railway container route from northern China to Uzbekistan via Kazakhstan, capable of delivering goods within 15 days.

“The company could benefit from the development of the economy, production, regional cooperation and foreign trade, as it increases the amount of container units required for processing,” according to Avesta.

Since 2010, Uztemiryulkontainer has typically distributed up to 51% of its net profit in dividends. Notably, for the past two years, the company has distributed 98% of its net profit in dividend payments, making for 36% and 44% dividend yields, respectively.

Based on Avesta's estimates, the current company share price presents substantial opportunities for investors, with the potential for significant volatility, surpassing the threshold of UZS 300,000 ($24.60) per share.

The company’s revenue moved up by 15.2% in 2022 and analysts see it increasing by 10% annually. The gross margin was equal to 76% of the average for the last five years.

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