The company released its performance report for the third quarter of 2010 today. During the reporting period, it achieved operating income of 724 million yuan and net profit of 19.63 million yuan, up 17% and -4% respectively over the previous year. According to the analysis of financial reports for the third quarter, the reason for the increase in operating income and the decrease in profit was that the gross operating ratio decreased by nearly 10 million yuan over the same period. Of the three expenses, sales expenses increased by 10 million yuan, while financial expenses decreased by 7 million yuan, while asset impairment losses increased by more than 3 million yuan, so the three expenses were basically the same as last year. The main reason for the decline in performance was also a decline in the profitability of the company's leading products.
The company achieved a total net profit of 53.75 million yuan in the first three quarters, with earnings of 0.08 yuan per share. Judging from the results for a single quarter, net profits of 19 million yuan, 13.69 million yuan, and 19.63 million yuan were achieved respectively, and the operating situation in the second quarter was slightly worse. Mainly because the price of yellow phosphorus showed a downward trend from April to June, which affected the profitability of the company's leading products.
Judging from the current situation in the chemical industry, chemical prices have been rising at an accelerated pace since September, and the prosperity of the chemical industry has risen rapidly. Judging from the price trend of yellow phosphorus, it has been rising for three consecutive months. We expect the price of yellow phosphorus to continue to rise in the fourth quarter, and the price trend throughout the year will be in a “V” shape. Therefore, the company's performance in the fourth quarter will be the best quarter of the year.
According to the profit forecasting model, we predict that the company's earnings per share in 2010 and 2011 will be 0.15 yuan and 0.28 yuan respectively, and the corresponding price-earnings ratios will be 68.6 times and 36 times, respectively. Judging from the current price-earnings ratio level, the company's valuation is higher than the average price-earnings ratio level of the chemical industry, so it is given a “wait-and-see” rating. However, since the company's performance is improving quarter by quarter, attention should also be paid to it.