For 1H2008, the company realized total turnover of Rmb1111mn (+30.99% yoy), net profit attributable to parent of Rmb120mn (+106.01% yoy), EPS of Rmb0.46.
Core businesses of the company include: Software development, system integration, outsourcing service, engineering design and intelligent transportation. During the first half of the year, while consolidating their iron & steel business, the company realized speedy expansion in fields of nonferrous metals, petrochemical, mining and quarrying, etc. As a result, the profit rose by a large margin. Moreover, the fast developed high-gross-margin software development industry resulted in a 1.32% increase to the company’s composite gross profit ratio, to be 26.30%. Thus the profitability of the company has been strengthened with sharp decline from period expense rate.
Domestic steel enterprises accelerated their steps of acquisition and restructuring ever since beginning of the year. As bellwether of informationization and automation solution supplier within the iron & steel industry, the company will surely benefit the most from the informationization restructuring triggered by enterprises acquisition and reorganization.
We forecast EPS of the company during 2008 and 2010 to be Rmb0.98, Rmb1.26 and Rmb1.58 respectively, relative P/E ratio at 20x, 16x and 13x separately. We remain our “overweight” rating to the company.