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Data:2009-12-12 2:34
Source: Jin Tong Securities
Investment Highlights: Eleventh Five-year railway construction in the upcoming feast. The latest planning by the Ministry of Railways, railway construction during the Eleventh Five-Year will invest 1.5 trillion yuan, of which 20-30% of the 3000-4500 million for investment in railway rolling stock, the remaining 1 trillion -1.2 trillion yuan, is the basis for construction investment. Infrastructure investment in the 40-50%, or about 5,000 billion in construction parts, about 3,000 billion for the land and demolition costs, about 3000 million on the construction of the line of the auxiliary equipment investment. 500-600 billion per year compared to years past, infrastructure investment and more than 200 billion yuan investment in railway rolling stock, the future size of China's railway construction will be several times larger.
Domestic high-speed rail line construction and vehicle accessories market capacity expansion amazing. The development of the company's current high-speed railway line fittings are mainly 6: Bridge bearings, expansion joints, waterproofing coating, CA mortar, rail fastenings and rail shock absorber. China's Eleventh Five-Year Plan will build 9800 kilometers (quasi-) high-speed passenger line, which corresponds to the product's market capacity is as follows:
Companies involved in six high-speed rail line project components market capacity for 2006-2010 total approximately 20.5 billion, while the bridge bearings, expansion joints, waterproofing coatings and CA mortar fragments only in the absence of high-speed rail construction, the use of conventional rail no such market demand. Previous year's rail lines in the traditional accessories involves very little each year only a few million dollars of orders from top to bottom.
Elastic element rail vehicles over the past year the annual market capacity of about 400 million yuan from top to bottom, or about 25.0 billion vehicle market capacity of 1.5%. On this ratio, the future rail vehicles in China during the Eleventh Five-Year elastic components market capacity will be expanded to 45-68 billion yuan, an annual average of 9-13 billion, which is 2-3 times the original.
Companies in high-speed railway accessories market has the domestic first-class technology and qualification reserves. Characteristics of the railway required safety first, so the use of related products need to have more long-term safety performance. In these six products, the company has with the Ministry of Railways approved the bridge bearings and rail fastener (has been used in the Qinghai-Tibet Railway) technical qualifications, including the company's CKP2 series of bridge bearings become China's three series in the recommended series of (iron ASTRI KGP series, Tianjin, three homes TGP series). The company's track shock absorber in Beijing, Hong Kong, Vancouver, Taiwan and other places in the subway and urban rail mass use of more than 200 km of China's Ministry of Railways High Speed Rail qualification is in progress. In addition the expansion joints, waterproofing coatings and CA mortar three products do not need the Ministry of Railways of technical certification, the company in that regard also has the domestic first-class technical level. Zhuzhou Electric Locomotive Research Institute grew out of a new era of material in the following four areas have core technologies: a, rubber, polymer, insulating materials, recipe technologies; 2, system architecture technology; 3, monitoring and analysis techniques; 4, process equipment and technology a long time, technology and qualified reserves allows the company to quickly capture high-speed railway construction brought about by market opportunities.
The domestic high-speed railway accessories market expansion smoothly, and gross margin was significantly higher than the existing elastic component products. The history of the company flexibility in the higher margin component products ,03-05, respectively 52%, 36%, 35%, in 2006 natural rubber prices in the first half due to the rapid, gross margins dropped to 29%. We believe that with the high-speed railway construction, fitting the general upgrading and updating of the railway company's product gross margins will be a noticeable recovery in some of the products will reach 2003 levels of gross margins.
International rail vehicle market in the further expansion. Crude oil prices in the context of countries around the world have stepped up to the rail transport (with significant energy-saving effects) input, the global demand for vehicle and vehicle parts and gradually strong. Companies as China's only international rail vehicle with a giant
(ALSTOM, GE, Siemens, Peng-Badi, HENDRICKSON, VOITH, and NACCO, etc.) supporting elastic element qualified vehicle manufacturers, demand for the international market is gradually opened, in recent years, annual export earnings growth of 40% from top to bottom. Our products have entered the U.S. market.
Restructuring of traditional products to meet the company's high-end market to the main business transformation. In 2006 the company is working to comply with the following three kinds of products and business spin-off: 1, with the company rubber components, engineering plastics, new paint main business unrelated to the business, such as real estate projects; 2, fade product technology with low-grade products, industry market share to retain only the top 5, or at least is the industry's top 10 products; 3, with higher levels of product technology, but significantly decreased profitability of products, the company plans to retain business qualification, but reduced production of related products. With the support of new products, high-speed railway, the company expects 2006 will be adjusted in and out of the scale of about 100 million yuan output value of the items, the beginning of the year sales revenue will reach total revenue of 460 million yuan to develop a plan to curb the gross margin will be corresponding with the raw materials prices and the downward trend.
The company finished the first half of 2006 and accounts receivable Gao Qi, from the main national railway market, a large-scale adjustment of product structure, not sales are sluggish. Because China's national railway main market is undergoing a large-scale adjustment of product structure, product planning and production cycle are rather nervous. In general, the international signing from order to delivery cycle to 18 months, while the Ministry of Railways under the command of our country is sometimes occur from order to delivery is only reserved for the next 2-3 months, resulting from the whole the depot to the parts supplier, often in order that the case has not yet issued in advance to prepare materials and production, difficult to accurately interface with the Ministry of Railways tender, resulting in a lot of money and inventory backlog.
RMB appreciation is double-edged sword. The next 2-3 years, the company's export revenues account for about 15-20% of the company's total revenue, the company exported products yuan revaluation would adversely affect the profits. But given the company the next 1-2 years, the flexibility of the fastest growing cost component accounts for 20-30% of the cost of natural rubber in China's major importer of natural rubber, Department of RMB appreciation will help drive down prices of imported natural rubber, thereby reducing pressure on product costs .
Of natural rubber price highs, steel prices have a downward trend, both to reduce the company's product cost pressures.
Expects the company from 2006 to 2008 EPS was 0.13 yuan, 0.30 yuan and 0.40 yuan, we believe that during the high growth performance of the company may be given to dynamic price-earnings ratio of more than 20 times the valuation of the next 6-month target price of 6.0-7.0 yuan.
