Event:
The company announced its 2008 annual report on March 20, 2009: It realized operating revenue of Rmb2.29bn (+38.49% yoy), net profit of Rmb41.61mn (-30.26% yoy) and EPS of Rmb0.22.
Our Analysis and Estimation:
1. Performance of Q4 2008 is below our anticipation;
2. The severe operating situation will maintain for some time;
3. We still hold optimistic view on its long-term development;
Investment Suggestion:
We lower the company’s 2009 EPS to be Rmb0.53, representing P/E ratio at 25x based on current share price; 2008 PB pegs at 2.9x, and current valuation is comparatively rational. However, we believe the company’s performance sensibility is high during the industrial upturn since its capacity will expend relatively fast in the future; besides, development prospect of magnesium is superior to that of other base metals, thus we maintain “Recommended” rating for the counter.