Price bottomed Xiamenwuye BUY

2013 mid-year report recently released results of Letters: the first half revenue 3.65 billion yuan, down 20%, attributable to shareholders of listed companies net profit of 070 million yuan, down 78%; corresponding to EPS of 0.1 million.
Main conclusions: first half of the tungsten price all the way up, excluding provision for 110 million yuan of rare earth impairment, about half of main EPS 0.25 yuan. Rare earth prices have fallen in the first half of the company's share price weakness is the main reason. Currently showing rare earth prices rebounded across the board trend, and we think the price of dysprosium oxide and supply is limited by the cost of supporting multiple positive will continue to be strong, is expected in 2013 to losses of rare earth new materials sector. Steady rise in the price of tungsten, energy and new materials business losses and real estate business under the assumption that release, we expect 2013-15 EPS were 0.85,1.24 and 1.57 yuan.
Valuation, Fujian RE integration platform gives the company a high valuation. Give 2013 EPS47 times earnings (in the past three years the company an average of 45-50 times earnings, 50 times the industry average valuation tungsten, rare earths average valuation of 70 times), corresponding to the target price of $ 40, buy rating.
Comments:
A Tungsten eletrode: the first half of tungsten concentrate prices have been rising, tungsten core business profitable. Currently tungsten concentrate prices stable at 140,000 yuan / ton at the top, the entire first half of the tungsten market is way up trend. A quarter fell 16 percent, essentially flat year on year in Q2, up 13%; overall in the first half of tungsten concentrate prices fell by 10%.
In terms of profitability reaction: a deserted quarter demand, profitability fell; second quarter, domestic demand to pick up tungsten products, sales prices gradually rise, profitability improved.
2 Rare Plate: Rare provision led the first half performance up sharply. Dysprosium oxide prices showed the first half down market, especially in May after dysprosium prices climbing from 1.5 million yuan / ton down to 110 yuan / ton, sales prices and sales volumes dropped significantly year on year, the company under Changting Jinlong Rare Earth due to operating losses and provision for inventory losses of 110 million yuan to prepare. And such provision has also led to a substantial decline in the company's results for the first half of the main cause.
3 Earnings forecasts and ratings. By splitting tungsten and rare earth prices, it can be seen in the first half of tungsten main industry profitability considerable (the real estate business is mainly reflected in the fourth quarter), and tungsten prices stabilized in the second half in the context of (current tungsten concentrate prices stabilized at 140,000 yuan / tons), mining and processing of tungsten and strong profitability. Earth, the current trend of rare earth prices rebounded across the board presents, we think the price of dysprosium oxide supported by cost and limited supply will continue to be strong multiple positive is expected in 2013 to losses of rare earth new materials sector. Results for the next three years increment: 1) Tungsten Business: Incremental mainly from tungsten prices, and the business is still the main contribution to profits; 2) energy and new materials: Incremental mainly from 3000 tons / year of production Magnets materials and energy losses; 3) Real Estate Business: The Company reserves more real estate projects, in 2013 the part of the business essentially unchanged from 2014 - 2012 15 years as the Strait International 4 and post-project delivery, real estate business will be significantly increased. Therefore, steady rise in the price of tungsten, energy and new materials business losses and real estate business under the assumption that release, we expect 2013-15 EPS were 0.85,1.24 and 1.57 yuan.
Valuation, Fujian RE integration platform gives the company a high valuation. Give 2013 EPS47 times earnings (in the past three years the company an average of 45-50 times earnings, 50 times the industry average valuation tungsten, rare earths average valuation of 70 times), corresponding to the target price of $ 40, buy rating.
4 uncertainty analysis. Tungsten Tungsten weak downstream demand led to price weakness. Rare weak downstream demand.