In the first three quarters of 2010, the company achieved operating income of 1.798 billion yuan, an increase of 86.86% over the same period last year; operating profit of 75 million yuan, an increase of 30.75% over the same period last year; net profit of owners belonging to the parent company was 55.62 million yuan, an increase of 21.35% over the same period last year; and basic earnings per share was 0.39 yuan. In the third quarter of 2010, the company achieved operating income of 536 million yuan, up 25.25% from the same period last year, down 24.66% from the previous year. The net profit belonging to the owner of the parent company was 13.19 million yuan, up 8.77% from the same period last year, down 22.14% from the previous month, and basic earnings per share was 0.09 yuan.
The increase in volume and price is the main reason for the increase in operating income. The company's main business is precision copper pipe, copper pipe deep processing products, copper processing equipment production and sales. 1) the company's products adopt the pricing mode of "electrolytic copper price + processing fee", and the product price changes in the same direction with the electrolytic copper price. From January to September 2010, the average price of electrolytic copper was 57010 yuan / ton, up 47.36% from the same period last year, and the price of the company's products rose in the same direction.
2) affected by the financial crisis, the base of the company's production and sales was low from January to September 2009, and the company's sales increased significantly in the reporting period compared with the same period last year.
The comprehensive gross profit margin rose month-on-month in the third quarter: the company's comprehensive gross profit margin in the third quarter was 9.76%, an increase of 2.48 percentage points over the same period last year, and an increase of 1.91 percentage points over the same period last year.
The main reason for the rise in gross profit margin is that the price of raw material electrolytic copper continued to rise from 52300 yuan / ton at the beginning of July to 60000 yuan / ton at the end of September, and the company enjoyed the extra income of "purchasing low-cost raw materials and selling high-priced products". Thus increasing the gross profit margin.
Capacity expansion brings a steady increase in profitability: in 2011, the company's three investment projects will be put into production one after another, and the production capacity of 60, 000 tons of precision copper tubes and 8000 tons of copper processing equipment will be formed after full production. The increase in production and sales will enable the company to earn more processing fees, under the premise that the needs of downstream customers are guaranteed, the company's profitability will be steadily enhanced.
Profit forecast: we expect the company to achieve a net profit of 73.03 million yuan attributable to the owner of the parent company in 2010, and the EPS in 2010-2012 is 0.52,0.62 and 0.83 yuan, respectively. According to the closing price of 19.78 yuan on October 21, the dynamic EPS E in 2010-2012 is 38 times, 32 times and 23 times, respectively. The company will usher in the next two years of rapid development opportunities, performance may exceed expectations, to maintain the company's "overweight" investment rating.
Risk tips: 1) there is a trend of overcapacity in the domestic copper tube industry, which may lead to a continuous decline in the industry average processing fees; 2) the company's product structure is too single, which is greatly affected by the downstream air-conditioning industry.
