From January to September 2009, the company achieved operating income of 405 million yuan, an increase of 1.6% over the same period last year; operating profit of 12.53 million yuan, down 47.2% from the same period last year; total profit of 15.23 million yuan, down 39.9% from the same period last year; net profit belonging to the owner of the parent company was 14.37 million yuan, down 34.9% from the same period last year; basic earnings per share are 0.073 yuan.
From July to September 2009, the company achieved operating income of 157 million yuan, an increase of 19.4% over the same period last year; operating profit of 8.02 million yuan, an increase of 149.5% over the same period last year; total profit of 8.64 million yuan, an increase of 83.8% over the same period last year; net profit belonging to the owner of the parent company was 8.67 million yuan, an increase of 105.8% over the same period last year; basic earnings per share are 0.044 yuan.
World leader of nitrocellulose: the company currently has an annual production capacity of 49,000 tons of H-type nitrocellulose, L-type nitrocellulose and energetic nitrocellulose, and is able to produce more than 70 different specifications of nitrocellulose products. In 2007, the domestic market share was 42.6%, ranking first in the world for many years.
Lower gross profit margin and increased period expenses engulfed net profit: the company's gross profit margin in the first three quarters was 19.2%, down 1.2% from the same period last year; period expenses totaled 62.9 million yuan, an increase of 13.3% over the same period last year; and the expense rate rose to 15.5%, up 1.6% from the same period last year. Judging from the single quarter, the company's rates improved significantly during the third quarter, which was only 10.7%.
Enter the upstream raw material alcohol industry: the company plans to invest 8.5714 million yuan in North Qinyuan Biological Engineering Co., Ltd., accounting for 30% of its registered capital. Northern Qinyuan is mainly engaged in edible alcohol, alcohol is one of the company's important raw materials, alcohol market seasonality, price fluctuations. The company's investment in upstream enterprises can effectively avoid operational risks, control procurement costs, and achieve expansion in the new product market.
It may become a major shareholder specialty chemicals integration platform. The company is the only listed company of special chemicals under China Arms Industry Corporation, and may become an integration platform for major shareholders of special chemicals assets in the future.
Earnings forecast and investment rating: the company's earnings per share for 2009-2011 are expected to be 0.13,0.22,0.23 yuan respectively, corresponding to the dynamic price-to-earnings ratio of 130,77 and 44 times. As the current stock price already reflects the company's performance, we maintain the company's "neutral" investment rating.
Risk tips: 1) all the company's current income comes from nitrocellulose, and there is a single risk of the product; 2) due to the particularity of the product, there are safety risks in the production process.