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Re:Rokko-An Explosiv... by MOSBY29th, Jul. 11:49 PM http://www.remisiers.org/research//dailyex2307.pdf
TP :$0.30...
CHINA GAOXIAN, CJ FERTLIZER: What analysts now say.....
Tuesday, 02 March 2010
Excerpts from latest analyst reports ….. UOB Kayhian reiterates ‘buy’ call on CHINA GAOXIAN, and 40-c target price
Analyst: Allen Jiao
Year to 31 Dec (RMB’m)
2008
2009
2010F
2011F
2012F
Turnover
1,830.3
1,812.4
2,335.3
2,998.6
3,311.3
Pre-tax profit
506.4
529.5
682.7
844.4
943.1
Net profit
390.4
409.1
512.0
633.3
707.3
Source: UOB Kayhian
China Gaoxian Fribre Fabric (Gaoxian) reported 4Q09 net profit ofRmb118.7m, up 16.1% yoy on the back of a 1% dip in its sales. For 2009, the company saw a 4.8% yoy growth in the bottom line. The results are in line with our expectation.
Ongoing robust demand for import-substitution products.We believe demand for Gaoxian’s unique fibre products will continue to grow as more and more local fabric manufacturers are turning to domestic suppliers, who have a cost advantage over foreign players and enjoys strong government support.
China Gaoxian CEO Cao Xiangbin. NextInsight file photo
According to Gaoxian, its yarn products are sold at a 20-30% discount to imported products of similar quality. The company had a Rmb300m orderbook as of end-09 to be fulfilled within the next two months, which reflects strong market demand.
Future growth to be underpinned by capacity expansion. To better leverage on the strong demand for its unique fibre products, Gaoxian has budgeted Rmb300m for its expansion plan for 2010. Total yarn production capacity is expected to increase from 180,000 tonnes p.a. currently to 241,500 tonnes by end-10.
For its fabric business, the company targets to expand annual capacity to 81,000 tonnes by end-10 from 17,000 currently. Gaoxian will continue to upgrade its product mix by investing in new facilities, thus further expanding gross margin.
Earnings Revision. We have raised our earnings forecasts for 2010 and 2011 slightly by 2.3% and 1.8% respectively.
Valuation/Recommendation. Gaoxian is trading at 2.5x 2010F PE and 2.1x 2011F PE, reflecting a more than 50% discount to its Singapore-listed peers’ 2010F PE. The Group’s current valuation seems attractive given its more stable performance during the industry downturn and its superior growth prospects. We reiterate our BUY recommendation with target price remaining at S$0.40 based on 6x2010F PE, which is a 20% discount to Hong Kong-listed peers’ average forward PE.
UOB Kayhian revises CJ Fertilizer target price to 48 cents.
Analyst: Allen Jiao
Year to 31 Dec (RMB’m)
2008
2009
2010F
2011F
2012F
Turnover
279.9
309.2
390.1
497.0
521.7
Pre-tax profit
78.5
79.0
110.3
134.6
141.5
Net profit
79.9
79.0
110.3
134.6
141.5
Source: UOB Kayhian
CJF reported 4Q09 net profit of Rmb15.8m, down 21.4% yoy. An acquisition of another local fertiliser producer is on the way, and we expect this to be a major earnings catalyst. Maintain BUY with target price raised to S$0.48.
Zhu Cheng Bao, chairman, CJ Fertilizer. NextInsight file photo
Ramping up internal production capacity to meet strong demand.
Despite the economic downturn in 2009, demand for CJF’s products remained so strong that the company was unable to fulfill all the orders by itself and thus had to subcontract a portion of production to another manufacturer. In view of the ongoing strong demand, CJF will invest S$6m into expanding its existing production capacity from 104ktpa to 135ktpa by 3Q10.
Acquisition on the way.The company also announced yesterday that it has entered into a Memorandum of Understanding (MOU) with Xiangyin County, DaDi Chemical Co., to acquire the latter’s production facilities that have a capacity of 40ktpa tonnes of anhydrous ammonia. Estimated consideration is Rmb60m. The acquisition is expected to enhance CJF’s economies of scale and raise the company’s market share in Hunan province.
More to come. Compared with organic growth, expansion through acquisitions, if executed properly, is a faster and more cost-efficient measure that also brings along a lower risk of oversupply as no excess capacity will be added to the supply chain. With more than 40 similar plants in Hunan province and CJF’s proven knowledge and experience in acquiring and refurbishing a nitrogenous fertiliser producer to make it more efficient and profitable, we can expect more acquisitions in the coming years.
Earnings Revision. We have raised our earnings forecasts for 2010 and 2011 by 15.1% and 23.2% respectively to factor in the contribution from the acquisition.
Valuation/RecommendationOur target price is also revised up to S$0.48 based on 7.7x 2010 PE, which is a 30% discount to Hong Kong- and Singapore-listed peers’ average forward PEs. Maintain BUY.
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