Event:
Recently, Anhui Huaxing Chemical Industry released 2008 annual report, which showed its core business saw benign growth; the company reported total revenue of Rmb1382.3328mn (+62.95% yoy), operating profit of Rmb208.5103mn (+161.08% yoy), net profit of Rmb182.1259mn (+167.06% yoy) and EPS of Rmb1.12.
Our Analysis and Estimation
1. Up and down of glyphosate price results in sharp fluctuations in performance;
2. Leading technology may partially fend off glyphosate price decline;
3. Upsurge of rural workers returning home will induce demand decline of glyphosate;
Investment Suggestion
Although the company’s leading technology may partially fend off glyphosate price decline, considering demand on glyphosate may also decline due to the upsurge of rural workers returning home, we hereby lower 2009 and 2010 earning forecasts to Rmb0.95 and Rmb1.09 separately, representing P/E ratio at 15.27x for 2008, 18x for 2009 and 15.69x for 2010; valuations are in reasonable range, thus rating is down-regulated to “Neutral”.