An overview of investment

Under the brand name "5100 Tibet Glacier Mineral Water", Jiyi is the largest brand of high-end spring water in China, accounting for 28.5% of the total volume of high-end bottled spring water. The company established a strategic relationship with CSL in 2007 to make it a supplier of bottled water to passengers on expressways and train stations, and its products can also be sold through the network of the railway department. The IPO forecast recorded a profit of not less than 370 million people in 2011, a year-on-year increase of more than threefold. As a result of 1) under the new Sale Agreement, CSL's 2011 sales volume will increase substantially on a year-on-year basis; 2) it has recently acquired customers such as Air China, CNPC Biopi Co., Ltd., China Mail Administration and the Tibetan government; and 3) the CSL is scheduled to receive a government subsidy of 140 million people in 2011, which I believe should be able to realize its 2011 expected profit. Based on initial public offerings of HK $2.62 to HK $3.50, the corresponding 2011 price-to-earnings ratio is 14.6 to 19.4. Among the benchmark companies listed in Hong Kong, unified China (220 HK) and Mengniu Dairy (2319 HK) have the highest valuations, with a price-to-earnings ratio of 24-25 times for 2011. However, I think that Jihua is not as good as unified enterprises such as China and Mengniu Dairy in terms of size and brand awareness. At the same time, the future profits of the collection are also faced with great uncertainty, especially the collection of government grants of 140 million people in 2011, while in 2009 and 2010, the amount of government grants received is 2.5 million people per year, so the grants available for future collection may not be maintained at the 2011 level. In addition, at present, the popularity of the "5100 Tibet Glacier Mineral Water" brand in the retail market is still low, so that the market needs to increase the impact of its revenue fluctuations according to a limited number of customers, such as the express line. Therefore, we think that the reasonable valuation of the market should not be less than 30% discount, that is, a price-to-earnings ratio of about 17 times 2011 earnings, and the corresponding stock price is HK $3.0, which is lower than the IPO ceiling, so it is at the neutral level.