For 07, the company reported revenue of 578 million yuan (+15.7% yoy), gross profit of 149 million yuan (+19.92% yoy), and net profit attributable to parent of 134 million yuan (+24.73% yoy) with EPS of 0.60 yuan. No payout or bonus share will be recommended.
Main business proceeded steady. During the period under review, revenue rose in a steady manner; however, due to dearer raw materials, gross profit of main business slid 5.04 ppt to 34.17%. Expense/turnover ratio dropped 2.33 yoy. Of which, administrative expenses fell drastically mainly because a surplus of 6.74 million yuan earmarked for welfare payable was left according to the new accounting practices. Moreover, 9.66 million yuan was saved from preferential tax treatment for domestically made equipment and as a result, net profit grew faster than gross profit.
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Earnings forecast and rating. Our EPS forecast is 0.67 yuan for 08E (implied PER of 28x) and 0.82 yuan for 09E (implied PER of 23x). Given its leading position in the domestic film capacitor industry and high earnings growth in the next few years, we are optimistic about Faratronic’s prospects. Reiterate our OVERWEIGHT rating on the counter.