For 1H2008, the company’s business income increased by 79.86yoy, net profit attributable to parent was Rmb141mn (+176.8% yoy), and EPS was Rmb0.19.
Internal and external expansion of the company resulted on coordinated development of its logistic business and sales of logistics; year-on-year increase was reported to be 59.3% and 81.8% respectively. As a result, profit was grown rapidly.
Dragged by logistic business, the company’s compound gross margin was declined by 0.6% yoy to be 6%. Despite of this, we still think gross margin rebound within the logistic sector expectable since standard of toll improved on the whole.
We consider complete business chain, promotion of basic logistics, smooth development of new businesses, relaxed policies and continuous support from large shareholders are all favorable factors for enlargement of the company’s size and its competitiveness.
We suggest investors to pay attention to iron & steel market which will likely to influence profitability of its logistic sales.
We project the company’s EPS during 2008 and 2010 to be Rmb0.35, Rmb0.45 and Rmb0.54 respectively, relative P/E ratio to be at 16.7x, 13x and 10.7x separately. Given its lower estimated value compared with the whole market and weak industry, we reiterate our rating of “Buy-in” for the counter.