The double main industries of cement and medicine are improving to boost profits by a large margin. The company has established a development strategy dominated by cement and medicine, supplemented by communications and trade. Last year, the double main industries of cement and medicine have achieved good results, and the company's performance has increased significantly. Among them, in terms of income level, it is basically the same as in 2009, while the profit growth is nearly doubling. On the one hand, the gross profit margin of the product has increased from 15.26% in 2009 to 19.60% in 2010, and the three expenses have been well controlled. On the other hand, it benefits from the investment income contributed to the company by the increase in the profits of the cement company (Zhejiang Jinhua Nanjianfeng) and the pharmaceutical company (Tianshili Group). Investment income accounts for 74.88% of the net profit attributed to the parent company.

Central and eastern cement prices improve profitability, pay attention to the unique advantages of the company's capacity expansion in the form of equity. The company's cement business earned 510 million yuan last year, mainly using Zhejiang Jianfeng cement Co., Ltd. as the integration platform (holding 93.91%). Last year, the subsidiary contributed 54.5973 million yuan in net profit. Its cement production capacity mainly comes from Hubei Daye (2.48 million tons of clinker in 2010). The local cement prices in Hubei and Zhejiang rose sharply in the second half of last year, raising the level of gross profit per ton. The gross profit margin of cement in the second half of the year increased by 10 percentage points to 19.85% compared with the first half of the year. In addition, it is worth noting that in addition to self-built control, the company's cement business is also actively expanding its production capacity in the form of equity investment through equity joint ventures. The company owns 35 per cent of Zhejiang Jinhua Southern Jianfeng cement Co., Ltd. (equity method) and 3.31 per cent of Southern cement (cost method, profit comes from last year's dividend). The two companies contributed net profits of 36.2138 million yuan and 31.5615 million yuan respectively last year. In total, the net profit of the cement business by way of investment accounts for 49.38% of the company's overall net profit. In addition, the company acquired a 75% stake in Yunnan Pu'er Peak Relay in November last year (with a new production capacity of 1 million tons). It is expected to contribute profits this year and next.

The volume of pharmaceutical business increased and profits increased. The company's pharmaceutical business had an income of 652 million yuan last year, of which the income ratio of pharmaceutical industry to pharmaceutical business was 1Rom 2.5. Zhejiang Jianfeng Pharmaceutical Co., Ltd. was the main integration platform for pharmaceutical business, and the subsidiary contributed 32.4625 million yuan in net profit last year. The pharmaceutical industry is mainly general medicine and OTC drugs, in which sales of key profit-making varieties such as cefoxime hydrochloride, amlodipine aspartate tablets, Yufeng Ningxin pills and sodium hyaluronate eye drops all increased significantly last year, especially cefotaxime hydrochloride. The company adopted positive strategies such as further market segmentation and strengthening incentives to agents, and its annual sales increased by 21.57% compared with the same period in 2009. Gross profit margin rose 4.75 percentage points. The pharmaceutical business includes Jinhua Pharmaceutical Company and Jianfeng Pharmacy, which has weak profitability. At present, the general idea of the company is to develop high-tech content, high value-added chemical raw materials and new chemical pharmaceutical preparations, supplemented by proprietary Chinese medicine preparations, timely enter the field of health food. Give priority to the development of anti-infective, cardio-cerebrovascular and antidepressant drugs, taking into account the specialized drugs with certain market potential. In recent years, several new drugs have been put into production every year, and a number of new drugs have entered the declaration stage. Some drugs such as penciclovir for injection are exclusive in China.

Participate in Tianshili Group to ensure the return on pharmaceutical investment. The company owns 20.76% of Tianshili Group. Last year, the investment in Tianshili Group achieved an investment income of 24.1708 million yuan, accounting for 18.20% of the overall net profit. Tianshili Group currently has excellent assets and good growth, which can ensure a better investment return of the company in the future.

Expand the production scale of upstream raw materials and preparations. The technical transformation project of the multi-functional experimental workshop of Jinfeng Pharmaceutical Co., Ltd. has successfully passed the GMP certification at the beginning of the year, ensuring the supply of raw materials for key profit-making products such as cefoxime. The dropping pill workshop of Jiangnan Factory of Jianfeng Pharmaceutical Co., Ltd. has added coating and automatic sub-packaging equipment, which has passed the on-site certification of GMP at the same time as the plant extraction workshop, laying the foundation for the company's next step in the development of plant medicine. The company announced yesterday that it decided to build a new production base in Jinxi Development Zone of Jinhua City. The project will be implemented in two phases. After completion, it will form an annual production line of 35 tons of cephalosporins, antineoplastic drugs and other raw materials (for preparations) and 200 million powder needle production lines. The implementation of this project will realize the further expansion of the company's pharmaceutical business, and is of strategic significance to improve the technical and technological level of Pinnacle Pharmaceutical Industry and expand the industrial scale.

It has more high-quality real estate business assets with very low book value. In addition to the two main industries of medicine and cement, the company also has a large number of real estate companies with very low book value. At present, the company holds 19.88% of the equity of the Golden hair Group, which is the largest shareholder. Because the equity is exactly less than 20%, it is not consolidated by cost accounting. The group is mainly engaged in real estate and market construction. At the same time, it is involved in property management, hotels, restaurants, shopping malls and other fields, forming a pluralistic pattern with real estate as its main business and market industry and property management as its two wings. There are many wholly-owned or holding companies such as Golden hair Real Estate, Jinhua Mall, Jinhua Sun City, Golden hair property, Golden hair Building and so on. Due to the early acquisition of these assets, the company currently holds its book value of only 36.36 million yuan, and the book cost is very low, which is far lower than the current market value.

Profit forecast. We estimate that the income of the company from 2011 to 2012 is 1.614 billion yuan and 1.777 billion yuan respectively, and the net profit attributed to the parent company is 216 million yuan and 288 million yuan respectively, and the corresponding earnings per share are 0.63 yuan and 0.82 yuan respectively.

Valuation. We only conservatively calculate the company value on the basis of cement, pharmaceutical and real estate trading assets (excluding cement assets and other assets denominated at cost). The total value of the company is about 6.2 billion yuan. The current market capitalization of the company is only 4.294 billion yuan, which is seriously undervalued. The stock price has more than 40% room to rise, with a "buy" rating for the first time, with a target price of 18 yuan.

1) cement: the company has 3.35 million tons of equity production capacity by 2010 and reached 4.1 million tons in 2011. based on the market value of 600 yuan per ton of cement, the cement plate is worth about 2 billion yuan.

2) Pharmaceutical assets: the net profit of the pharmaceutical sector in 2011 is expected to be about 40 million, which is about 1.2 billion yuan in terms of 30 times PE. The company participates in 20.76% of Tianshili Group, which owns 47.27% of Tianshili (600535). Based on the existing market value of 19.4 billion yuan of Tianshili (600535), the market value of this asset is 1.9 billion yuan. Considering that Tianshili Group also has other profitable assets, the overall market value of Tianshili Group is expected to be close to 2.5 billion yuan. In this way, the overall pharmaceutical sector has a market capitalization of 337 million yuan.

3) Real estate business: the company owns 19.88% of the equity of the Golden hair Group, and the group's total assets in 2009 are 1 billion yuan. It is conservatively estimated that the current market value of the group's assets is 2.8 billion yuan, corresponding to the company's equity appreciation of 500 million yuan.