Main points of investment:
Revenue grew 3.3% in 2012 and profits rose 20.3%:
As of 2012, turnover increased by 3.3% year-on-year to 1.004 billion yuan (the same below). Net profit increased by 20.3% to 159 million yuan, or 18.8 cents per share. The final interest rate is HK3.8 cents, compared with HK3 cents in the same period last year. Growth was recorded in all business segments. Profit growth exceeded our previous expectations, mainly due to lower costs and higher-than-expected growth in new products.
The decrease in the cost of raw materials increased the gross profit margin by 3.5 percentage points:
Although the price of the company's products declined slightly during the year, the new products launched by the company a few years ago and the sales volume of the original products increased significantly, so that the company's revenue still increased slightly compared with the same period last year; at the same time, the decline in the cost of raw materials was greater than the sales price of the products, and the optimization of the company's production process expanded the company's profit margin, and the gross profit margin increased by 3.5 percentage points to 26.1%. The annual coal consumption of the company's own power generation equipment is about 180000 tons, and the decline in coal prices in the past two years can bring about 18 million cost savings to the company.
Continue to improve the supporting of the industrial chain and strengthen the competitive advantage:
As the company has completed the registration and preliminary construction of Deco in 2012, the company will occupy more upstream raw materials and products in the future, and the company will continue to improve the upstream industrial chain during the year. increase the production capacity of the core links of the industrial chain, including sodium cyanide and chloroacetic acid. This will provide sufficient protection and obvious cost advantage for the follow-up development of downstream products.
The development of new downstream products will become the driving force for future growth:
The development of new products is an important strategy for the company to promote its growth. In the future, the company will launch a series of new products: first, the joint venture with Henkel is expected to start production and operation in 2013, with a total capacity of 20,000 tons in three phases will bring considerable growth to the company's revenue and profit; second, the company's new business division during the year-sodium cyanide and its downstream products, will also bring more room for development in the future. As this product category will have good growth potential in the future, the Group has developed a number of downstream products in 2012 to explore new markets. The preparation and construction of the new production line is currently under way, and the new product is expected to be on the market in fiscal year 2014.
Target price of HK $2.49, maintain buy rating:
The growth momentum of the company's new products is strong, and the prices of the original products have recovered since the second half of 2012. It is expected that the profit growth of the company's original business will still exceed 10% in 2013. We think it is reasonable to give it a global average valuation, maintaining the target price of HK $2.49, equivalent to 7.7 times PE in 2013, with 70 per cent room to rise from the current price and maintain the buy rating.
