Event
The company announced today that its wholly owned subsidiary Fuyao Hainan Float Glass Co., Ltd planned to sell its fixed assets and all assets under the intangible assets item as of March 31, 2009 to Hainan AVIC Special Glasses Material Co., Ltd. After negotiation of both sides, target assets price was temporarily fixed at Rmb450mn based on valuation.
Our Analysis and Estimation
Sales of Hainan production line is in line with our expectation.
The event will cause negative impact on its performance in short term, but favorable to its development in the long run.
Giants overseas are trapped into dilemma due to global financial crisis; its overseas OEM faces with opportunities.
The company’s profit margin is expected to recover.
Defensive strategy is favorable to its further development.
Investment Suggestion
The company needs Rmb226.8051mn accrual as impairment preparation for this split-off. As this production line is not sold out, financial expenses, depreciation and amortization expenditure will total Rmb70mn annually. As analyzed above, 2009 performance losses sourced from this is only predicted at Rmb156.8mn. We lower its EPS in 2009 as Rmb0.33, and maintain forecast of 2010-2011E EPS at Rmb0.4 and Rmb0.42. “Recommended” rating is hereby maintained.