In the first quarter of 2009, the company reported business turnover of Rmb851mn (+9.46% yoy or +5.56% mom), operating profit of Rmb56.55mn (-6.85% yoy or -0.13% mom), net profit attributable to parent of Rmb49.42mn (+10.88% yoy or -16.46% mom), and basic EPS of Rmb0.11.
Earning forecast and rating: Earning forecast is hereby maintained. Its 2009-2010E EPS is projected to be Rmb0.52 and Rmb0.64, representing dynamic P/E ratio at 30x and 25x based on closing price of Rmb15.82 on April 20, 2009. Given that its strategy transformation goes smoothly and growth is explicit, and that it is expected to realize the industrial upgrade in terms of preparation exportation to the regular market, “Overweight” rating is hereby maintained.
Potential risks: 1) Domestic preparation promotion being not smooth.