In the first half of 2011, the company achieved operating income of 799 million yuan, an increase of 57.15% over the previous year; operating profit of 44.25 million yuan, an increase of 42.91% over the previous year; net profit attributable to owners of the parent company was 32.05 million yuan, an increase of 39.19% over the previous year; and earnings per share of 0.15 yuan.
Operating income increased 57.15% year over year, and net profit increased 42.91% year over year. We believe that the main reasons for the sharp increase in the company's operating income are: 1. The price of copper as a raw material has risen sharply; 2. The company has adapted to the country's large-scale infrastructure and power grid transformation situation to increase market development in power grid construction, key engineering fields, and the western region.
The consolidated gross margin fell 0.13 percent year over year. The company's consolidated gross margin in the first half of the year was 16.44%, down 0.13 percentage points from the previous year. The main reason was the rise in copper prices compared to the same period last year.
The power cable business has grown dramatically, and sales are booming in the Northeast and Northwest regions. The sales revenue of power cables in the first half of the year was 664 million yuan, an increase of 64.22% over the previous year, and sales revenue of bare wire was 76.6 million yuan, an increase of 31.39% over the previous year. By region, the northwest region achieved revenue of 137 million yuan, an increase of 109.38% over the previous year; the Northeast region achieved revenue of 35.13 million yuan, an increase of 175.70% over the previous year. We believe that the main reason for the above situation is that the company is adapting to the country's infrastructure investment direction while vigorously developing markets with high potential, such as the northwest and northeast markets.
The company will focus on progress in the high-pressure field in the next two years. The concentration of medium and low voltage cables is low, and the profit is low; while high voltage and ultra-high voltage cables have a higher concentration and higher profit.
The company's fund-raising projects are 500kV environmentally friendly flame retardant ultra-high voltage cross-linked cable and 500kV resource-saving aluminum alloy overhead line projects. They are all ultra-high voltage products, and high-voltage and ultra-high voltage cables need to pass pre-certification before they can be sold on power grids. Therefore, we believe that the company's fund-raising project will produce 110KV products using a decompression method at the beginning of production; production and marketing of high-pressure and ultra-high-pressure products should pay attention to the product pre-certification situation.
Profit forecasts and company ratings. We expect the company's EPS for 2011-2013 to be 0.42 yuan, 0.48 yuan, and 0.66 yuan respectively. Based on the calculation of the stock closing price of 13.40 yuan on July 27, the corresponding dynamic price-earnings ratio was 32 times, 28 times, and 20 times, respectively. We raised the company's investment rating to “increase holdings”.
Risk warning: The financial risk of a sharp increase in accounts receivable, the company's fund-raising project products cannot pass pre-assessment risk and the risk of fluctuations in raw material prices.
