Sanan Optoelectronics: Accelerating growth in the next 2-3 years


Considering the actual LED assets, the company realized revenue of 343 million yuan in the first three quarters of 2009, a year-on-year increase of 18.4%, and a gross profit margin of 40.3%; the net profit attributable to the parent company was 142 million yuan, and the earnings per share was 0.51 yuan (the share capital after the issuance). The results have significantly exceeded expectations. The substantial increase in net profit is actually caused by non-recurring gains and losses. In the third quarter, the company's non-operating income was included in the government subsidy of 55.9 million yuan. If this item is deducted, the net profit of the main business in the first three quarters is estimated to be 94.5 million yuan, a year-on-year increase of 38%.

Future income growth depends on the progress of MOCVD equipment investment, and the monitoring indicators are accounting subjects such as cash for purchasing and constructing fixed assets. According to the 3 quarterly report, the company's purchase and construction of fixed assets amounted to 160 million yuan, that is, 4 MOCVD to 22 units will be added by the end of the year.

The scale of the Tianjin curtain investment project is about 20 units, reaching an annual output of 850,000 pieces per year and 20 billion chips. The ratio of equipment used to produce blue-green and red-yellow is generally about 2:1, that is, 14 sets and 6 sets of blue-green and red-yellow, respectively. This calculation can increase the revenue of GaAs chips by 336 million yuan and GaN. The chip is 672 million yuan, a total of 1.008 billion yuan. According to the 20% net profit margin, it can contribute a net profit of about 200 million yuan.

We believe that due to the recent competition from domestic companies to join LED chip production and the company's large-scale capacity expansion, future price declines will result in lower revenue and profit than expected.

The company's revenue in 2009-11 is expected to be 4.8, 8.0 and 1.28 billion yuan respectively. The net profit attributable to the parent company is 1.8, 2.2 and 330 million yuan respectively, and the earnings per share are 0.64, 0.77 and 1.16 yuan respectively.

Given that the current share price corresponds to a price-to-earnings ratio of 48-11 times for the 10-11 forecast EPS, the Neutral rating is maintained.

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