The company's income mainly comes from power cables, which account for about 80% of the main business income. Bare wires and wires and cables for electrical equipment are the other two main sources of income of the company, accounting for about 20% of the revenue. From the gross profit of the main business, about 80% of the company's profit comes from the power cable business, which is the most important source of profit for the company. From the level of gross profit margin in the past three years, the gross profit margin of power cable business has been fluctuating around 17%. The gross profit margin of bare wires and electrical equipment wires and cables is low, but it has been showing an upward trend.
Industry analysis: the power cable industry has maintained a stable trend with stable growth, low concentration and the influence of raw materials, and is expected to maintain a steady growth of about 15-20% from 2011 to 2015. At the same time, the market concentration of China's cable industry is very low, and the total income of the top 25 enterprises in the cable industry only accounts for 12.96% of the whole industry. Low-end products have low profits due to fierce competition among many producers, while middle-and high-end products are less competitive and lucrative. There are obvious heavy materials and light work in the cable industry, and the main raw material, copper, accounts for about 70% of the production cost. Therefore, the gross profit margin of the industry is very sensitive to copper price fluctuations. According to a rough estimate, a 10 per cent rise in copper prices would lead to a 6 per cent drop in gross profit margin.
Development trend analysis: cost control and high-end products are the key factors that affect the company's future revenue and profitability: the cost control ability of copper materials and the status of high-end cable products-110kV and above.
All the funds raised by the company will be used to invest in 500kV environment-friendly flame retardant ultra-high voltage cross-linked cables and 500kV resource-saving aluminum alloy overhead lines, with an estimated increase of 847 million yuan and a gross profit of 136 million yuan. It is estimated that the internal rate of return is 29.7%, the investment profit margin is 32.2%, and the payback period of all investment is 5.13 years.
Profit forecast and valuation: the reasonable value range of the company is 14-15 yuan. It is estimated that the net profit of the company in 2010-2012 will be 0.81,0.97 and 123 million respectively, and the corresponding diluted EPS will be 0.50,0.61 and 0.77 yuan respectively. Compared with the valuation level of cable enterprises in A-share market, we think that the reasonable value range of the company is 14-15 yuan.
