Category: Money tips Release Date: 2006-07-10
Investment Highlights:
Pre-announcement issued by the company expects its 2006 net profit rose more than 300%. Substantial increase in performance of the company pointed out that the main reason is:
Countries to strengthen their investment in urban and rural power grid, the state and local power grid to increase the promotion of amorphous alloy transformer efforts.
Actively expand the national market, main business revenue to maintain rapid growth.
The tax department approved the company's 2006 tax rate of 15% of the taxable corporate income tax and received a 2005 income tax refund of about 5.39 million yuan.
In accordance with the pre-increase announcement, we estimate that the company in 2006 EPS at 0.31 to 0.38 yuan, basically in line with our August 2006 forecast (EPS of 0.36 yuan, net profit up 360%).
We continue to like the rapid growth of amorphous alloy transformer market, it now appears, with some areas efforts to promote the strengthening of amorphous transformer market growth may exceed our expectations, the latter part of the next few years we will update the amorphous transformer market forecasts. The company's ability to re-copy the "Jiangsu model" is a major cause for concern, and we keep close track.
As the market gradually increase the capacity expansion and its competitors, combined with the medium-term copper price rose in 2006, gross margins declined slightly. Although the amorphous alloy of copper and the remaining uncertainty in price changes, but we estimate that 2007's gross profit margin levels should be basically maintained at 28% -29%.
As the company actively explore the market, operating expenses as income in the same direction to grow substantially. In our previous prediction of 06 to take an annual operating expense ratio 7.7% (2005: 9.6%; in 2006 in the first half: 7.6%), followed by three quarterly announcements in 2006 operating expenses ratio (8.7%) than our assumptions, we 06 years to determine the actual operating costs could be higher than we forecast.
Growth in the size of the market, the subsidiary of Japan-Hong Kong confidence to ensure a stable supply of amorphous cores, and deliver significant return on investment, which is another main reason for significant increase in performance of the company.
We do not adjust their profit forecasts, to maintain "prudent overweight" investment rating.
