Oriental Group established Dongfang Grain and Oil to enter the high-end rice industry in 2009, and the company plans to use three years to build and improve five large-scale circular economy core processing parks in Wuchang City, Fangzheng County, Qingan County, Zhaoyuan County and Tonghe County, Heilongjiang Province, radiating 5 million mu of rice planting area, reaching 2 million tons of procurement. At the same time, relying on Jinzhou Port as a major grain trader, we will jointly establish a trade platform for grain and oil transportation, storage and sales, and achieve the strategic goal of 5 million tons of grain and oil trade volume.
At present, the company has signed a contract for 1.15 million mu of agriculture, of which 440000 mu are Wuchang area, of which there are 40, 000 mu of organic rice fragrance. Recently, due to the requirements of the State Reserve for grain harvest, all grain enterprises have completely suspended grain collection until April 15. according to our preliminary estimate, Dongfang Cereals and Oil has completed the purchase of about 300000 tons of rice in 2010, and we predict that in 2011, after completing 60% of the sales progress, the cumulative income will be 2.484 billion yuan, contributing 802 million yuan to gross profit.
The company's Dongfang Home is one of the largest household building materials chain enterprises in China, with 25 direct stores and a business area of more than 1 million square meters. at present, the business model of the building materials circulation industry is relatively simple, and the mode of competition tends to be homogenized. the gross profit margin has dropped from 20% in 2000 to about 10%. We expect the business to maintain 5% growth and contribute 180 million gross profit. Chifeng Gold Mine is expected to achieve a gross profit of 21 million.
It is estimated that the earnings per share of Oriental Group from 2010 to 2012 are 0.13,0.38,0.54 yuan respectively. We believe that in 2011, its rice business contributed a gross profit of 802 million yuan and a net profit of 0.17 yuan per share (deducting 25% of the three expenses and 25% enterprise income tax). Taking into account its possible future growth, we can give a 40-fold valuation of 6.8 yuan. Dongfang Home and Chifeng Gold Mine net profit loss, give a valuation of 0.64 yuan at twice the registered capital, and other equity assets contribute 0.30 yuan per share. We give 15 times the valuation of 4.5 yuan, the company's reasonable valuation level of 12.1 yuan, to give an overweight rating.
Risk hint: 2011 is the first and critical year for the promotion of high-end rice in Dongfang Grain and Oil. At the same time, Dongfang Grain and Oil also faces the problem of weak restrictions on farmers under the contract of "order agriculture". In the future, it is possible for farmers to raise prices or sell rice to other grain merchants.