Event
The State Council discussed and passed regulation & promotion plan of light industry in principle recently.
In 2009, turnover rate of the company was 100%, with average price at Rmb9.90, which was lower than exercise price (Rmb10.04) of option scheme.
Our Analysis and Estimation
The company is bestowed with good development opportunities in integration due to promotion plan of light industry, OMP event of Mengniu Group and assets bidding purchase of Sanlu bankruptcy.
Maximum dealing with negativity of melamine event, 2009 operating expenses settlement and stock payment amount to over Rmb1.7bn book loss.
2009 and 2010 performances are to see high growth.
Investment Suggestion
The company’s 2008-2010E EPS are forecasted to be Rmb-2.1, Rmb0.48 and Rmb0.81 separately; for 2009-2010, P/E are forecasted at 23x and 14x and PS at Rmb0.46 and Rmb0.39. The company’s future expectation will be sharply boosted by the market and we upgrade its rating from “Cautious” to “Recommended” with target price at Rmb16.