In the first three quarters of 2009, the company achieved operating income of 706 million yuan, down 1.98% from the same period last year; operating profit of 24.29 million yuan, an increase of 31.05% over the same period last year; net profit belonging to the parent company was 16.61 million yuan, up 21.75% from the same period last year; and earnings per share was 0.05 yuan.
The price of raw materials has fallen and the gross profit margin has increased. The increase in gross profit margin of cotton yarn products was due to an increase in the output of compact spinning projects, with sales up 52.21% year-on-year, while raw material prices fell 18.12% year-on-year. The company's gross profit margin rose 2.13 percentage points year-on-year to 7.35%.
The decline in costs is another reason for the company's turnaround. The sales expenses incurred by the company during the reporting period were 2.61 million yuan, down 20.75% from the same period last year, and the sales expense rate was 0.37%, 0.09% lower than the same period last year. The management fee was 23.55 million yuan, an increase of 146.72% over the same period last year, and the management fee rate was 3.34%, an increase of 2.01% over the same period last year, mainly due to the increase in technological development fees in the current period. Financial expenses-2.49 million yuan, an increase of 388.67% over the same period last year, and the financial expense rate was 0.35%, a decrease of 0.28% over the same period last year, mainly due to the decrease in loan interest rates and loans in the current period.
Operating cash flow declined. The net cash flow from operating activities decreased by 80.66% compared with the same period last year, mainly due to the increase in cash paid for goods and services in the current period over the same period last year, while the net cash flow from investment activities increased by 38.36% over the same period last year. This is mainly due to the decrease in the payment of equipment for compact spinning projects in the current period compared with the same period last year. The net cash flow generated by fund-raising activities increased by 98.17% over the same period last year, mainly due to the increase in cash dividends paid in the same period last year and the cash paid in repaying loans in the same period last year compared with the current period.
The major shareholder pledged the shares of the company. Jiangsu Sanfangxiang Group Co., Ltd., the largest shareholder of the company, unpledged its shares in the company 16,0491960 and re-pledged to the Export-Import Bank of China.
Earnings forecast: the company is expected to earn 0.08 yuan per share and 0.09 yuan per share in 2009 and 2010. Calculated with the previous day's closing price of 5.88 yuan, the corresponding dynamic price-to-earnings ratios in 2009 and 2010 were 76 times and 67 times, maintaining the company's "neutral" investment rating.
Risk Tip: 132005160 tradable shares held by Jiangsu Sanfang Lane Group Co., Ltd. under limited sales conditions have been listed and circulated since August 7, 2009.