Orders were returned to 320,000 tons, and more to come
Land valuations are still underestimated, giving upward impetus to stock prices
The current market price of the stock is only 6.6 times the price-earnings ratio and 0.5 times the net market ratio, and the valuation is still cheap
LATEST INFO
Pearl River Steel Pipes (the “Company” or “Pearl River”) rearranged the time required to process steel pipe orders to avoid delays in domestic orders, thereby securing the Hong Kong-Zhuhai-Macao Bridge project, CNOOC's East China Sea Huangyan Shallow Sea Gas Pipeline Project, and Thailand's National Petroleum Authority (PTT) onshore gas pipeline project, bringing a new dawn to the company.
Our interpretation/our opinion
The company ordered a total of 320,000 tons in the first quarter of 2014, and will receive domestic steel pipe orders in the second half of 2014, so we expect the business situation to improve further in 2014. Therefore, we can now rely solely on our “basic” production forecasting model to determine the fair value of Pearl River steel pipes. However, the average price assumption was revised downward due to weak steel prices, but we still expect profit to increase six times to 278 million yuan in 2014 (RMB, same below).
catalytic
We have not calculated the revaluation earnings of Pearl River Steel Pipe's plot of land in Panyu, but based on recent records of similar land transactions, we believe that the value of this plot of land for Pearl Tube Steel Pipe is still underestimated. Further valuation of this 125,000 square meter plot of land could bring in earnings of more than $4 billion (or about HK$5.00 per share), roughly double the book value of Pearl River Steel Pipe's current balance sheet and stimulate stock prices.
valuations
We have returned to evaluating the value of the company based on the company's core steel pipe business, raising the company's target price from HK$3.47 per share to HK$3.80 per share based on the 2014 forecast price-earnings ratio of 11 times, and revised earnings per share to $0.2734. The current market price of the stock is only 6.6 times the price-earnings ratio and 0.5 times the net market ratio, which is extremely attractive. Maintain the buy rating.