Morningstar Analyst Report for Central Japan Railway

Narrow moat-rated JRC is the second-largest railway operator in Japan servicing Tokaido Shinkansen, which represents more than 70% share of the nationwide Shinkansen network system in terms of mileage person per operating kilometers. Tokaido Shinkansen between Tokyo, Nagoya and Osaka drives the majority of its earnings, representing about 70% of sales and 85% of profits. The company benefits considerably from this impeccable railway infrastructure, which cannot be replicated by its peers due to extremely large capital spending requirements. We like that the most profitable Shinkansen route has also allowed the company to enjoy the highest return on its regulated base among its peers. According to the International Union of Railways, JRC reported the highest passenger revenue per operating kilometer at USD 6.7 million per kilometer against USD 2.6 million per kilometer for JR East, USD 1.8 million per kilometer for JR West, USD 0.6 million per kilometer for Deutsche Bahn in Germany, and USD 0.1 million per kilometer for Amtrack in the United States.