Jianghai shares: future focus on the film capacitor market

In 011, the company achieved operating income of 1.037 billion yuan, a year-on-year increase of 27.6%;

The operating profit was 128 million yuan, an increase of 47.21% year-on-year; the net profit attributable to the parent company owner was 104 million yuan, a year-on-year increase of 21.43%; the basic earnings per share was 0.6530 yuan/share, and the profit distribution plan was to increase 3 shares for every 10 shares.

The company's main business revenue in 2011 was 1.037 billion yuan, a year-on-year increase of 27.60%.

The main reasons for the company's revenue growth are: 1. Gradually put into production of investment projects; 2. Inner Mongolia Highly Electronic Materials Co., Ltd.'s chemical foil processing fee income increased significantly compared with the same period last year.

Benefited from the optimization of product structure, gross profit margin has improved. In 2011, the company's comprehensive gross profit margin was 20.68%, an increase of 3.50 percentage points year-on-year, of which the gross profit margin of capacitors with a larger proportion of revenue was 21.28, an increase of 5.48 percentage points year-on-year. The increase in the gross profit rate of capacitors was mainly due to the increase in the proportion of industrial capacitor with higher gross profit margin.

During the period of cost control has improved. During the reporting period, the company’s interim expense ratio was 9.39%, a year-on-year decrease of 1.80 percentage points. The sales expense ratio was 3.58%, an increase of 0.52 percentage points over the same period of last year, which was mainly attributable to the increase in advertising and business promotion fees and the increase in sales staff’s labor costs; the administrative expense ratio was 6.46%, a year-on-year decrease of 1.21 percentage points, mainly due to the increase in revenue. This was due to the economies of scale; the financial expense rate was -0.64%, a year-on-year decrease of 1.11 percentage points, mainly due to the reduction of interest expenses due to the repayment of bank loans and the interest income generated from the raised funds.

Film capacitors are an important part of the future. The company issued an announcement in August 2011, using ultra-raised funds to invest in the construction of high-voltage large-capacity film capacitors. Film capacitors can be used in high-voltage frequency conversion, electric vehicles and other fields, and have good stability. Although the current total demand is much less than that of Aluminum Electrolytic Capacitors, the future market space is even wider. In the future, high-power film capacitors will hopefully become the company's new growth point.

Maintain the company's "overweight" investment rating. We expect the company's 2012-2014 EPS to be 0.85 yuan, 1.05 yuan, and 1.26 yuan respectively. Calculated at the closing price of the previous trading day, the corresponding company's 2011-2013 P/E ratio is 23x, 19x and 16x, respectively. Taking into account the company's valuation and growth and other factors, maintain the company's "overweight" investment rating.

Risk Warning: Aluminum prices and electricity prices have risen, labor costs have risen, the downstream market is in a sluggish economy, and the market for film capacitors has not been expanded.