Event
The company issued 2008 annual report on April 15, according to which it realized business turnover of Rmb3921.8374mn (+2.92% yoy), operating profit of Rmb559.4648mn (+10.36% yoy), and net profit attributable to shareholders of common stocks of Rmb512.9447mn (+11.58% yoy), and diluted EPS of Rmb0.52 based on total equity of 994.865mn shares after the additional issuance. The company’s dividend distribution plan was to send pretax dividend cash of Rmb2.00 for every ten shares on the basis of total equity of 994.8648mn shares on December 31, 2008.
Our Analysis and Estimation
Its performance is below our expectation.
Price of long stapled cotton maintains high and average price of indent decreases, which all leads gross margin decline in Q4 2008.
It is predicted that the company’s performance will be negatively impacted by sluggish overseas demand.
Priorities should be given to exportation environment which has slightly recovered.
Investment Suggestion
Earning forecast and rating
Based on relative production quantity, product price and variation in main material prices, its 2009-2010E operating revenue is predicted to be Rmb3984mn, Rmb4067mn and Rmb4402mn; net profit to be Rmb581mn, Rmb652mn and Rmb688mn, with EPS of Rmb0.58, Rmb0.66 and Rmb0.69.
Investment Suggestion
“Cautious” rating is hereby maintained for Lu Thai Textile (000726), and “Recommended” rating maintained for Lu Thai Textile (200726). Supposing P/E ratio of 2009 at 15x, reasonable share price is Rmb8.7, representing DCF-WACC at Rmb10.14 given G=0%, WACC=9.58%.
Impetus for Share Price Surge
Supposing that overall industrial exportation maintains the upturn in April, given a comparatively low valuation, short-term transaction opportunity will probably emerge.