Event: For first three quarters of 2008, the company reported business turnover of Rmb4998mn (+10.4% yoy), operating profit of Rmb477mn (-12.08 % yoy), net profit of Rmb385mn, diluted EPS of Rmb0.70 (+1.05% yoy), and ROE of 10.27%, equal to 10.82% as reported last year.
Our Analysis and Estimation: Q3 Performance slide is considered to be normal, and will be recovered in the short-term. Net profit of the quarter is only Rmb83.2mn (-40% yoy, or -50% qoq), with business income and operating profit dropped differently. As far as we are concerned, this is normal and do not mean that its operation is weakening. Although newsprint market will be comparatively sluggish in Q4 or even the next year for stagnant of economy, its businesses will not suffer much. Moreover, Meifei 8#, main raw material for making newsprint slid much more than the newsprint itself in terms of price. Thus we predict gross margin of newsprint will be increased substantially in the company.