Since the company went public, it has been 20 years since the company went public, transforming from the original Jinhua cement factory to a “cement+pharmaceutical” asset-based company. The “cement+pharmaceutical” dual business pattern is quite bright. Its cement assets are cyclical assets that have been raised at the bottom of profit, while pharmaceutical assets are growth assets with broad prospects for the industry. The profitability of cement assets was significantly improved through strategic cooperation with China Building Materials in 2007; while the shares in the Tasli Group obtained from the 1998 capital increase are the company's core assets with the greatest potential for appreciation.
Most cement assets are concentrated in the East China region, and profitability is expected to increase steadily. The sales volume of equity corresponding to the company's cement assets was about 6 million tons, with 2/3 concentrated in East China. The cement industry in the East China region has already entered a mature period, and there is not much pressure on additional supply. The regional market integration of China Building Materials, which began in 2007, has greatly improved the competitive pattern of the industry. The improvement in supply and demand and the improvement in the competitive pattern of the industry have greatly improved the profitability of the East China cement industry, as evidenced by a significant rise in the profit center. In the next 2-3 years, there will be little pressure on new production capacity in East China. Against the backdrop of a weak economic recovery, the profitability of the industry is expected to rise steadily. The profitability of the corresponding company's cement assets will improve.
Pharmaceutical assets: Jianfeng Pharmaceutical has stable profits, and Tiansili Group's equity assets have high growth potential. The company's pharmaceutical assets consist of two parts: the merger of Jianfeng Pharmaceutical, which is the main business, and the shares of Tianli Group, which contributes investment income. The profitability of Jianfeng Pharmaceutical has been generally stable in recent years, and growth and profitability are relatively average. The company holds 20.76% of Tasili Group's shares, and the corresponding indirect holding of about 10% of Tasili's shares; Tasli shares are undoubtedly the highest quality asset under the Tasili Group. The profitability of unlisted assets under the Tasli Group has continued to improve in recent years. Among them, the chemical asset platform, Tianshi Diyi Pharmaceutical, has excellent profitability and growth, and is expected to be injected into Tasili shares in 2013. The health products and overseas marketing segments of the Tansili Group are still being cultivated, and profitability is expected to improve.
The company's assets have strong potential for revaluation, giving the company an “increase in holdings” rating. We expect the company's 2013-2015 EPS to be 0.52, 0.67, and 0.85 yuan respectively, and the corresponding PE to be 16.3, 12.7, and 9.9 times. The company's assets are valued separately and then added together, and the company has strong potential for asset revaluation. The first coverage gave the company an “increase in holdings” rating.
Risk warning: The macroeconomic recovery fell short of expectations, causing the profit of the company's cement assets to fall short of expectations; the return on investment corresponding to the company's long-term equity investments was confirmed to be lower than expected.