In the first half of 2011, the company achieved operating income of 5.104 billion yuan, an increase of 42.07% over the same period last year; operating profit of 237 million yuan, an increase of 54.01% over the same period last year; net profit of 146 million yuan of owners belonging to the parent company, an increase of 74.49% over the same period last year; and diluted earnings per share of 0.24 yuan.
The company is mainly engaged in the research and development, production and sales of air-conditioning compressors, as well as refrigeration-related businesses such as refrigerator compressors and commercial freezers and special air conditioners. The company's profits mainly come from the air-conditioning compressor business, which has been losing money in recent years, while other refrigeration-related businesses contribute relatively small profits. During the reporting period, the company produced 10.2 million air conditioning compressors and sold 11.24 million, an increase of 32.25% over the same period last year, resulting in a substantial increase in the company's main business income. The company's customers are Gree, Midea, Haier, Ox, Zhigao and other major domestic air-conditioning manufacturers, of which Gree is the company's largest customer.
The boom in the air-conditioning industry led to the growth of compressor sales. Air-conditioning compressor is the core component of air-conditioning, and the prosperity of the industry is basically the same as that of air-conditioning. From January to June 2011, the air-conditioning industry continued to boom, with air-conditioning sales reaching 67.13 million units, an increase of 30.84% over the same period last year.
Corresponding to the boom in the air-conditioning industry, sales of air-conditioning compressors reached 77.58 million in the first half of 2011, an increase of 21.30% over the same period last year. As the industry leader, the growth rate of the company is higher than the average level of the industry.
The comprehensive gross profit margin has declined and the ability to control expenses has been improved during the period. In the first half of 2011, the company's comprehensive gross profit margin was 12.17%, down 1.92 percentage points from the same period last year. This is mainly due to the high copper price during the reporting period, the company's bargaining power on the downstream air-conditioning industry is weak, unable to quickly transfer costs. The rate of expenses during the company period was 7.40%, down 1.90 percentage points from the same period last year. Among them, the sales expense rate was 2.07%, down 0.53% from the same period last year, and the management expense rate was 4.19%, down 1.48% from the same period last year.
After reaching production, the fund-raising project is expected to increase earnings per share by 0.16 yuan. The company plans to issue 65 million additional shares to the controlling shareholder Shanghai Electric (Group) Corporation and raise 506 million yuan for the transformation and expansion project of small energy-saving and fluorine-free frequency conversion compressors and the new production capacity project of L series ultra-high efficiency compressors. Both projects were put into production in 2012, and after all the projects are in production, the company will increase the production capacity of 2 million small compressors and 2 million L-series high-efficiency compressors. It is expected that after all the projects reach production, the profit will increase by 105 million yuan, and the earnings per share will be increased by 0.16 yuan according to the share capital after the additional issue.
Earnings forecast: we expect the company's earnings per share from 2011 to 2013 to be 0.34 yuan, 0.44 yuan and 0.52 yuan, respectively. Based on the closing price of 10.19 yuan on August 22nd, the corresponding dynamic price-to-earnings ratio is 30 times, 23 times and 19 times respectively. In view of the fact that the company's current valuation is significantly higher than the industry level, downgrade the company's investment rating to "neutral".
Risk hint: the demand for air conditioners has declined significantly; the price of raw materials has risen sharply.
