Investment highlights:
On the 2nd, we participated in Smick's joint survey and had exchanges with senior company leaders
We recently participated in Smick's joint research and had exchanges with company leaders. Our main concerns focused on the progress and operation of new projects, and exchanged views on the company's operation and development next year.
The company's focus for the next 3 years: (1) the health board may become a new growth point for transformation; (2) after the relocation and product renewal of its main business, ceramic tiles, this year will be a new starting point, and costs are expected to fall; (3) the company will try to enter the pension industry.
Health board is a new building material developed independently by the company for 2 years, completely independently formulated and produced by its own process. Unlike ordinary gypsum boards, Smick Health Board has two biggest characteristics: it emits negative ions and is fire resistant grade A1. The greatest effect of releasing negative ions is to purify air suspensions and improve air quality. Currently, the product has been certified by the country, emits negative ions and is not radioactive. Under the current smog and haze situation in major cities in China, this product is a new type of building material that meets the most urgent domestic demand, and represents one of the company's transformation directions. The company invested a total of 120 million yuan, and the two lines are expected to be put into operation in the fourth quarter of 2014.
After two years of relocation and product introduction of new products, the company's main business, the ceramic tile division, accounted for nearly 30% of new products last year, and new products were also launched this year. Once capacity utilization is increased this year, the cost will be further reduced. Furthermore, the company will further advance its distribution model, and the number of dealers is expected to increase by more than 100 to around 400 this year.
The pension industry is a rising industry in China. The company's absolute advantage is the 600 acres of high-quality land left over after the Shanghai plant was relocated. The next 2-3 years will be a good point of interest. We will continue to monitor the progress of the company's pension industry.
Valuation and investment advice.
The 2014-2015 EPS was 0.07 and 0.13 yuan respectively, and PE was 95 and 51 times. This year's growth will mainly depend on new products and cost reductions. The health board is probably the most likely growth point to exceed expectations, so we will continue to pay attention.
Risk warning.
The progress of putting the health board project into operation fell short of expectations, the real estate market declined sharply, and the pace of opening up the market for new products was slower than expected.