招商证券*港股研究*Sijia(01863.HK)-2010 result is below expectations and stock price has volatility risk*01863**陈征宇,赵晓

报告名称：Sijia(01863.HK)-2010 result is below expectations and stock price has volatility risk
研究员：陈征宇,赵晓
报告类型：港股研究*公司报告
报告日期：20110321

行业/子行业：
公司名称及代码：思嘉集团(01863)
投资建议：买入

【内容摘要】

Sijia Group ( "Sijia" or the "Company") announced 2010 annual results on Mar. 15, 2010. The Company achieved revenue RMB970mn, an increase of 69.2% & was in line with our expectations. Gross margin was 45.3%, remained stable during 2010. Because the Company started the new product development & market expansion in the 2010Q4 for Phase II Fuzhou factory & Shanghai production base, the sells & administrative expenses increased significantly, higher than our expectation. In 2010, the Company's net profit was RMB22 mn, up 26.9%, but the net profit margin was 22.5%, representing a decrease 7.5% as compared to 30% during 2009. The Company realized EPS RMB0.29 & the board recommends dividends distribution of HKD0.10, representing payout ratio 32.2%. By end of 2010, the Company has cash and cash equivalents RMB360mn.

Gross margin was stable but declined during 2010. The decline of gross margin was mainly due to rising raw material price. Based on our forecast of PVC prices, we expect the Company will improve the gross margin in the first half of 2011. In addition, the Company can maintain stable gross margin by adjusting product structure.
Selling and administrative expenses increased by 472.9% & 207.7%. The increasing selling expenses were mainly caused by a series of new products launch & carrying out of R&D activities, which we believed are one-time expenses. The increasing administrative expenses were mainly caused by expenses of the public offering & employee stock options & costs for upgrading & improving existing products & R&D of new materials. If we phase out one-time expenses, net profit for 2010 would be RMB290mn, up 68.3% & was in line with our previous forecast. We expect that the cost will return normal level for 2011-2012 & maintain growth rate with sales.
Valuation & rating Because the Company's earnings in 2010 & production capability were lower than our expectations, we lowered the Company's 2011-2013 revenue & earnings estimates. We expect that the Company's revenue & net income for 2011-2013 will grow at a CAGR 38.2% & 39.0% to reach RMB2.5bn & RMB690mn respectively in 2013. We reduce the Company's 1 yrs TP of HKD6.00, equivalent to 11.75X2011P/E (8.38X2012P/E), reiterate "BUY" rating. Because the Company's 2010 result is below market's expectation, the share price has short-term volatility risk.


【摘要结束】