According to the quarterly report of 2009, the company's operating income in the first three quarters was 371 million yuan, down 43.62% from the same period last year; the operating profit was 1.453 million yuan, compared with-2.6816 million yuan in the same period last year; the net profit belonging to the owner of the parent company was 1.0206 million yuan, compared with-2.9479 million yuan in the same period last year; and the diluted EPS was 0.008 yuan. The operating income in the third quarter was 153 million yuan, down 28.32% from the same period last year; the net profit was 453900 yuan, compared with-3.864 million yuan in the same period last year, and the diluted EPS in the third quarter was 0.003 yuan.
The decrease in price led to a 43.62% drop in operating income compared with the same period last year. The company's main business is the production and sales of aluminum processing materials, the main products include all kinds of aluminum and aluminum alloy plates, strips, foil products and so on. Revenue fell 43.62% in the first three quarters compared with the same period last year, mainly due to the decline in aluminum production and sales and the decline in aluminum prices with electrolytic aluminum prices.
The sharp rise in gross profit margin made the company barely turn around its losses. The year-on-year reversal of net profit in the first three quarters was mainly due to the company's comprehensive gross profit margin rising 3.37 percentage points year-on-year to 9.58% during the reporting period. Among them, the gross profit margins in the first three quarters were 12.96%, 8.14% and 8.69%, respectively, which were higher than the historical average (7.03% in the previous five years). However, the company has been in a state of small profit since 2005 (except 2008), and we remain cautious about its later operating condition.
Downstream demand recovered steadily. With the gradual stabilization of the economy, the company's main downstream industries such as construction, transportation, home appliances and other industries have shown varying degrees of growth. Although the pressure of overcapacity in the aluminum industry is still high, the recovery in downstream demand is pushing up the prices of aluminum and electrolytic aluminum simultaneously, with the average price of electrolytic aluminum rising 8.72% and 8.88% respectively in the second and third quarters compared with the previous quarter. The stable rising stage of electrolytic aluminum price from the low level is a better business environment for the company.
Profit forecast. We expect the company to barely reverse its losses in 2009 and diluted its EPS to 0.03,0.02 and 0.05yuan respectively from 2009 to 2011, maintaining the company's "neutral" investment rating.
? Risk hints: 1) the risk of a sustainable macroeconomic recovery; 2) the risk of periodic fluctuations in the non-ferrous industry.
