In the first three quarters of 2008, the company realized operating revenue of Rmb777mn (+49.7% yoy), operating profit of Rmb46.83mn (-40.2% yoy); net profit attributable to parent of Rmb45.74mn (-17.7% yoy) and diluted EPS of Rmb0.0698. For Q3 2008, the company reported operating revenue of Rmb251mn (+25% yoy), net profit attributable to parent of Rmb20.42mn (-12% yoy) and diluted EPS of Rmb0.0312.
Both operating revenue growth and composite gross margin were in steady level, and period expense ratio went down. Investment income fell by 26.3% yoy to Rmb119mn; main reasons for that were as follows: 1) deficit of Huafei Company for years; 2) growth of BMC shipment volume bogged down. Due to substantial loss from debt restructuring in the same period of 2007, non-operating expenditure fell by 88.2% yoy to Rmb2.24mn in 2008.
We lower the earning forecast and predict 2008-2010E EPS to be Rmb0.09, Rmb0.10 and Rmb0.12 (2008-2009 EPS down by Rmb0.06 and Rmb0.11 respectively), representing P/E ratio of 36x, 30x and 27x, with the valuation level above that of industry average. In addition, the company’s profit mainly arose from investment income, while continuous deficit of Huafei Company and BMC earning fall greatly affected the company’s performance. In light of uncertainties of its development, we thus maintain “Neutral” rating.