The basic situation.
The company is the first listed company in China's food and beverage industry, and its main business is tea intensive processing.
At present, the company is actively extending to both sides of tea garden planting and terminal products, and strives to establish a business structure covering the whole industry chain.
The company's operating income has a compound growth rate of 28.18% from 2008 to 2011, but its profitability is poor. In the past four years, the average annual net profit of shareholders belonging to the parent company is only 3.1 million yuan. Excluding investment income and non-operating income, the company's main business has been at a loss in the past four years.
The focus of the company: fund-raising projects have good development prospects.
In the first three quarters of this year, the company's operating income was 185 million yuan, down 15.24% from the same period last year. The net profit attributed to the parent company was 86 million yuan, an increase of 170.21% over the same period last year, and basic earnings per share was 0.34 yuan. The substantial increase in the company's net profit is mainly due to the increase in investment income. Excluding investment income, the company's main business actually lost 19.64 million yuan, an increase of 96.48% over the same period last year.
The company transferred a 15 per cent stake in Shenzhen PepsiCo Inc Beverage Co., Ltd. in the second quarter of this year and earned an investment income of 104 million yuan, and still holds a 10 per cent stake in the company. After this equity transfer, the company will change its accounting of the asset from the equity method to the cost method in the future, which means that the company will not be able to directly include the share of profits obtained from the company in its profit statement, which will have a certain impact on the company's book profits.
In the context of the poor profitability of the company's main business, the company successfully implemented private placement in June 2011, actually raising 572 million yuan, trying to develop to both ends of the tea industry chain. The actual amount of capital raised by the company is 1.53 times of the shareholders' equity and 0.87 times of the total assets at the end of 2010.
The main investments raised by the company are: tea industry chain comprehensive investment project (planned to invest 270 million yuan), high-end tea brand investment and development project (planned to invest 155 million yuan), acquisition of 48.33% equity project in Shenbao Huacheng (already invested 65 million yuan), tea and natural plant R & D center project (planned to invest 54 million yuan), Joint venture to establish Zhejiang Shenbao Huafa Tea Co., Ltd. Project (planned investment of 30 million yuan) The above-mentioned projects will be completed one after another by March next year.
Under the background of the rapid growth of household consumption, the company's large-scale investment covers the whole tea industry chain and has a good development prospect. These projects are expected to contribute revenue and profits to the company from next year.
Investment advice.
We expect the company to have an operating income of 252 million yuan in 2012, achieving a net profit of 82 million yuan belonging to the shareholders of the parent company, with a current price-to-earnings ratio of 23 times. We are optimistic about the development prospects of the company's fund-raising projects, and will pay attention to the progress of related projects. However, there is still a lot of uncertainty about whether the company can significantly improve its profitability through this transformation. Taking into account the company's fundamentals and valuation level, temporarily give the company a "neutral" rating.