The net profit in 2010 was 40.37 million yuan, an increase of 44% over the same period last year.
Benefiting from the rapid growth of domestic sales of large and medium-sized customers in 2010, the company achieved operating income of 257 million yuan in 2010, an increase of 54.82% over the same period last year, which was higher than our expectation of 15%. The net profit was 40.37 million yuan, up 44% from the same period last year, and 0.20 yuan per share, which was higher than the market consensus forecast of 0.19 yuan, slightly lower than our expected 0.22 yuan.
The rise in the price of enamelled copper wire of raw materials leads to a decline in the gross profit margin of the company's products.
Affected by the fluctuation of copper prices in the international market in 2010, the average purchase price of the company's main raw materials enamelled copper wire rose by 30.96%, so that the gross profit margin of the company's main product retarder fell from 40.82% to 37.1%, which was higher than we expected. If copper prices continue to rise sharply in 2011, the company's gross profit margin will continue to be under pressure.
The revision of GB7258 is expected to be completed in 2011 and officially implemented in 2012.
GB7258 "Technical conditions for Motor vehicle Operation Safety" has formed the latest discussion paper for review in November 2010. we maintain our previous judgment on the policy introduction process, that is, the approval draft will be launched in mid-2011 and the standard will be officially released in the fourth quarter of 2011. We expect that the requirements for the installation of retarders for heavy trucks in the standard will not change much, that is, all trucks of more than 12 tons must be fitted with car retarders that comply with the regulations.
Valuation: keep the "buy" rating and the target price of 28.75 yuan unchanged
We are optimistic about the explosive growth opportunities brought by the revision of GB7258 standards to the domestic retarder industry. The company is the leading enterprise in the domestic retarder industry and will fully benefit from the explosive growth of the industry. We maintain the "buy" rating and the target price of 28.75 yuan. We use the relative valuation method to value the company, give the company 13 times the average price-to-earnings ratio of the auto parts industry after the high-speed growth period at the end of 2016, and discount its market value to 2011 at an equity cost of 7.6%, with a target price of 28.75 yuan.
