(BUY, S$0.405, TP S$0.650)
2Q11 net profit of RMB63m (+17% YoY, +4% QoQ) was slightly below our RMB67m projection as continued NPRT’s poor performance of RMB6m (2Q10: RMB12m) weighed on a higher-thanexpected RMB108m gross profit (our estimate: RMB93m) from extrusion business. We revise our estimate for NPRT’s FY11 contribution down to RMB29m (old: RMB57m), and now expect 3Q11 and 4Q11 earnings of RMB66m and RMB74m, with FY11F earnings of RMB263m. Share price is down some 60% YTD, underperforming STI’s -11%, on negative news flow from the PRC railway industry and global economy fronts. However, at 9x FY11F P/E and 0.8x P/B (-1SD and -1.3SD to its six-year historical mean of 20x and 4x respectively), we believe much of the uncertainty have been priced in and see an attractive risk-reward trade-off. Maintain BUY with a lower TP of S$0.65 (old: S$0.73), pegged to 15x FY11F P/E.
34% revenue growth. Key revenue growth drivers included the ramp up in production output from its two new extrusion lines (total 20,000 tonnes of annual capacity), and two new fabrication lines (700 train cars). Extrusion order wins tallied RMB323m YTD. Close to 82% and 35% of our FY11 and FY12 estimates for extrusion are backed by announced order wins respectively.
42% gross profit growth. Due to Midas’ cost plus processing fee (est. 60-70% of its contracts)
arrangement, we track its operating performance through absolute gross profit, which had been
improving progressively to RMB108m (2Q10: RMB76m; 1Q11: RMB102m.
NPRT contributed RMB6m. NPRT’s contribution was a lower RMB6m (2Q10: RMB12m; 1Q11: RMB4m) due to fewer train cars delivered in the quarter. We revise our estimate for NPRT’s FY11 contribution down to RMB29m (old: RMB57m) after three quarters of slow train car delivery.
No comments:
Post a Comment