From January to September of 2008, the company realized turnover of Rmb107mn (-0.1% yoy); net profit attributable to parent of Rmb0.7mn (with a loss of Rmb15.13mn compared with the same period last year); earning per diluted share was Rmb0.002.
The company mainly deals with auto electric instrument, and the gross margin is in decrease in recent 2 years.
In 2008 Q3, the company realized a small profit and main reason was that Aerospace Science & Industry Finance CO. Ltd (with the company’s shares in) distributed Rmb6mn to the company in 1H2008. Compared with the net profit Rmb2.17mn of the company in 1H2008, tightened profit margin in Q3 was mainly due to sharp increase in Q3 expenses. Highlight of the company was still assets restructuring plan. The company proposed to issue 28.6mn shares with Rmb11.13 per share, took over shares of the following 3 companies held by The Third Research Academy of CASIC: 93.91% of ASIT，86.9% of Beijing Aerospace Science & Technology CO. Ltd and 100% of Beijing Aerospace Haiying Xinghang Mechanical & Electrical Equipment CO. Ltd. At present, the asset restructuring plan has been approved by State-owned Assets Supervision and Administration Commission, since the proposed issue price was much higher than that of secondary market, when to complete it is still a puzzle.
Earning forecast and rating: supposing the company can complete assets restructuring in 2008 as expected, (if the company failed to realize assets restructuring in 2008, we forecast net profit attributable to parent of Rmb1mn and EPS Rmb0.005), newly increased stocks will be 28.6mn after additional issuance, which attributed to a total of 250mn shares. Earning per diluted share of 2008-2010E is predicted to be Rmb0.14, Rmb0.18 and Rmb0.20, representing PE of 36.6X, 28.5x and 25.3X respectively, with relatively “neutral” rating.
Potential risks: because earning forecast was based on the hypothesis that the company can complete assets restructuring expectably in 2008, while in additional issuance plan that the company took over The Third Research Academy of CASIC, price of additional issuance was proposed at Rmb11.13 per share, much higher than that of current secondary market, so we are not sure whether the company can realize additional issuance on time in 2008.