Special cable gross margin recovery photovoltaic business is lower than expected

In 2011, the company achieved operating income of 4.799 billion yuan, an increase of 64.41% year-on-year; net profit attributable to listed companies was 208 million yuan, an increase of 10.05% year-on-year; in 2011, it achieved a return of 0.87 yuan per share. From the fourth quarter quarterly point of view, revenue was 1.791 billion yuan, an increase of 91% over the same period last year, and the net profit attributable to listed companies was 52.12 million yuan, down 12% year-on-year. For the first time in the fourth quarter, there was a single-quarter loss. The main reason is that the three expense ratios resulting from the merger and acquisition consolidated statements and the issuance of bonds have increased. In the fourth quarter, the management, sales and financial expense ratios increased by 3.78, 0.8, and 1.01 percentage points year-on-year respectively. In the current period, a high distribution plan will be implemented. For each 10 shares, 10 bonus dividends (including tax) will be distributed for 10 shares, and a total of RMB 24,300.00 million will be distributed as a cash dividend.

Comments:

The cable business grew steadily, and the gross profit margin was boosted by the recovery of special cable gross margins.

Looking at the 2011 performance contribution split, the cable business contributed 93% of the net profit. In 2011, the cable business of the company as a whole recorded a year-on-year increase of 38.09%, of which the main flame-retardant and fire-resistant cable of the main revenue group increased by 36.6%. Powered by the drop in copper prices, the company's cable business gross margin was 13% in 2011, an increase of 0.3 percentage points year-on-year, of which fire-retardant flame-retardant cable gross margin was 16.05%, an increase of 0.66 percentage points year-on-year. The special cable business belongs to the steady growth of the company with its advantages, and it will continue to grow steadily and rapidly in the future.

Photovoltaic business was lower than expected. In 2012, we expect improvement.

Affected by the large fluctuations in demand of the photovoltaic industry in 2011, sharply lower prices, and increased R&D expenditure, Tenghui Power's 2011 net profit was 28.71 million yuan, which was lower than the cash-locked commitment of 31.3 million yuan. Major shareholders have already completed cash compensation. The minimum value of Tenghui Power's net interest rate commitment for 2012-2013 was 264 million yuan and 366 million yuan respectively. Considering that the PV market situation is still severe in 2012, we believe the company will increase its market development efforts in order to achieve improved performance in 2012.

Valuation and profit forecast:

We forecast the company's earnings per share for 2012-2014 to be 1.18, 1.47, and 1.78 yuan respectively, giving the company a 20x P/E ratio in 2012 with a target price of 23.6, and maintain a “hold” rating.

risk warning:

The photovoltaic subsidy policy changed, and the price of the photovoltaic industry chain dropped sharply.