Main points of investment
(1) the main profitable product of the company is steel rope, with gross profit accounting for 97%. The existing steel rope production capacity is 125000 tons, and after the whole plant is moved to Xiangjiang Industrial Park, it will reach 200000 tons. We believe that affected by the progress of relocation, steel rope production capacity was low before and after expansion, remained stable in 2012 and 2013, and then released quickly.
(2) the military industrial enterprise background makes the company have a certain technology precipitation, and its gross profit margin is higher than that of similar companies, and it is recognized as the key high-tech enterprise of the National Torch Plan by the Ministry of Science and Technology. The technological advantage will continue to be maintained in the later stage.
(3) the company's market is mainly concentrated in the southwest, accounting for 65% of revenue, of which Guizhou Province is the most. "some opinions of the State Council on further promoting the sound and rapid economic and social development of Guizhou" brings a large number of project construction opportunities, these projects will require a large number of wire rope products, the company has a great market opportunity.
(4) the overall relocation project of the company has been listed as a key construction project in Guizhou Province. As of December 31, 2011, the company has obtained a land use right certificate of 685400 square meters. Land formation is being carried out according to the planning of the people's Government of Zunyi City and Xiangjiang Industrial Park of Zunyi City.
(5) at present, the wire rope market is in a competitive state of complete competition, even vicious competition, and the loss area of the industry is expanding. In February 2012, the proportion of loss-making enterprises in the industry reached 19%, and opportunities for industry integration emerged, from which the company, as an industry leader, will benefit. However, due to the coexistence of various ownership components of steel rope enterprises at present, it is difficult to integrate and difficult to improve in the short term.
Performance forecast
We estimate that the company's operating income in 2012 and 2013 will be 1.5 billion yuan and 1.59 billion yuan respectively, an increase of 1.3% and 6% respectively. The corresponding PE is 47 times and 44 times respectively, considering that the negative impact of relocation on the company in the past two years is greater than positive. The competition in the domestic silk rope industry is becoming increasingly fierce, the company is located in the southwest, the products and raw materials are away from both sides, and the transportation cost is high, so we will not grade the company for the time being.
Risk hint
1) the risk of rising raw material prices
2) the progress of relocation is slower than expected.
