In 2008, the company reported business turnover of Rmb3440mn (+20.1% yoy), net profit attributable to shareholders of listed company of Rmb380mn (+15.8% yoy), diluted EPS of ~Rmb0.76, and operational cash flow of Rmb1.24 per share. The company’s dividend distribution plan was to send pretax cash of Rmb1 for every ten shares.
In Q4 2008, the company reported net profit attributable to shareholders of listed company of Rmb19mn (-78.9% yoy or -81.7% mom), impairment losses of current accrue assets of Rmb30mn, of which impairment of raw material accounted for Rmb28mn.
Earning forecast: Supposing that thermal electricity assets acquisition is completed in early Q2 2009, we predict its 2009-2010E net profit attributable to shareholders of listed company to be Rmb333mn and Rmb414mn, and EPS to be Rmb0.67 and Rmb0.84 separately, representing dynamic P/E ratio at 21x and 17x based on closing price of Rmb14.18 on March 30, 2009.
Investment suggestion: We don’t think its present valuation is of advantage, however, given high certainty of successive growth, investors are suggested paying attention in the long term. “Overweight” rating is temporarily maintained. Our earning forecast and rating are comparatively conservative, and the company’s real profitability might beyond our expectation due to product price rebound and further decline of coal cost.
We are still pessimistic with its Q1 2009 report, and investors should focus on pressure caused by short-term share price adjustment.