In-line performance: For 07, the company logged turnover of 177.50 billion yuan (+12.00% yoy), operating profit of 4.89 billion yuan (+130% yoy), net profit to parent of 3.14 billion yuan (+150 yoy) and EPS of 0.39 yuan. Diluted EPS stood at 0.25 yuan within our expectations. No payout or bonus share will be recommended.
Nonrecurring gains contributed a lot to net profit. In 07, net profit would shrink 35.60% to 2.02 billion yuan when nonrecurring profit impact was excluded. Two major noncurrent contributors were 1.19 billion yuan retrieved from staff welfare provision and 328 million yuan of investment returns from share transfer. However, nonrecurring profit will give away to expansion of core business and increase of gross margin in driving future earnings growth.
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Valuation and rating: We continue to forecast 08-09E EPS to be 0.34 yuan and 0.45 yuan respectively. In China, the company is the second largest project contractor after China Railway Group. Taking into account its advantage in scale and deserved premium, we rate this stock an OVERWEIGHT.