Stable performance and rising costs are a drag on net profit growth. From January to September 2011, the company's revenue was 702 million (yoy36%), belonging to the parent company's net profit of 89.11 million (yoy28%). The rise in raw material prices is the main reason why net profit growth is slower than revenue growth, but as commodity prices began to fall in the fourth quarter, the company's cost pressure is gradually decreasing.
The bearing is growing rapidly, and the progress of the technical renovation project is later than expected. The demand for bearings has increased rapidly in the past two years, including aviation, military industry, heavy truck and construction machinery, which are widely used in a wide range of fields and effectively reduce systemic risks. The progress of the special bearing technical renovation project implemented in 2009 was later than expected, the transformation of the technology center was completed, and the factory building in Lantian Development Zone was partially completed, which began to be put into production in 2012. The total production capacity can be increased by 2 million sets.
The gear business is also the focus of the future. Gear business is also the focus of the company. The negative effects of some self-made gearboxes of the original main customers Xiamen and Liugong have been digested. This year, the company's products gears and gearboxes have been shared to the rapid growth of downstream construction machinery. As the growth rate of construction machinery slows, the growth rate of gear business will gradually slow down in the future, which is expected to be about 10-15% in 2012.
Set up subsidiaries to enhance long-term growth potential. The company plans to set up Jinchanglong Machinery Technology Co., Ltd. in Hua'an County, Zhangzhou City, and obtain 900 mu of industrial land in the Economic Development Zone at a preferential price. As a condition, the company must invest 2 billion yuan in the next few years, mainly used in high-end mechanical parts such as bearings. The project is to be implemented in three phases, the first phase is 300 mu, the construction period is about 2 years, and the specific investment projects are still under investigation. The acquisition of land this time has enhanced the future growth potential of the company, the export growth rate is fast, and the prospect is not optimistic. Exports grew rapidly in 2011, but export destinations include mature markets such as Europe and the United States, and it is difficult to maintain a high level of export growth due to the future crisis such as European debt.
Profit forecast: the company's EPS in 2011 and 2012 is 0.35,0.43 yuan, corresponding to 27X and 22x PE, taking into account the current PB2.3X, which is historically low, maintaining a "cautious recommendation" rating.
