思嘉集团：强化材料及系列产品的排头兵,极具活力的中型民企

Please see important notice on the last page. 1 of 35Company ReportSIJIA GROUP CO(01863.HK) Sijia Group Co ("Sijia" or the "Company") is the largest manufacturer of reinforced materials in China, & is principally engaged in design, manufacture & sales of reinforced materials, conventional materials & end products. The Company ranked at the 1st place in term of major products revenue in 09 and becoming the leader of the industry. At the end of 09, the Company had total assets & net assets of RMB469.9mn & RMB351.0mn. We expect the Company to achieve the sales of RMB10.2bn & RMB16.7bn, with net profit of RMB322.1mn & RMB640.3mn repsectively in 2010 & 2011. Based on the capacity expansion plan, we estimate the CAGR of revenue & net profit to reach 53.1% & 66.0% respectively over 2010-2012. We derived the one year TP of HKD5.51 from a blend of DCF & PE valuation, representing 6.27X2011P/E(12.46X2010P/E). There is a upside potential of 107.1% compared to the closing price of HKD2.67 on 08/06, we initial it with “BUY” rating. “High growth, high margin & high dividend payout ratio” business model (1) High YoY revenue growth. The Company’s revenue had a CAGR of 89.3% over 06-09, & we expect the Company to achivie a CAGR of 53.1% over next 3 yrs; (2) High profitability. The reinfocred materials produced by the Company are the high-end composite materials with high profit margins. From 06-09, reinforced materials had the average gross margin of 39.9%. For end products, the Company improves the product margins through its enhancing materials production and products differentiation strategies. The integration production not only helps the margins of products, but also enable the Company to assures the products quality. By comparing with U.S. and Europe materials market, the reinforced materials and end products both are still in the early stage of market cycle. Hence, we believe the Company at least can maintain the high profitability model in the next 2-3 yrs. (3) High dividend payout ratio. the Company recommends at least 30% dividend payout ratio of net profit. National policies favorable to biogas sector The low-carbon economy is the future trend of development. Since the government starts to promote biogas as a clean energy, it exhibited a rapid growth in the recent yrs. The government invests RMB20-30bn each year to finance the biogas program, as result of promoting environmental protection and improving the quality of life in rural area. We believe the prospect of the clean energy will drive up the demand of biogas, so as to increase in the sales of the Company. Financials RMB mn 2008 2009 2010E2011E2012ERevenue 300 570 1,015 1,674 2,378 Growth (%) 101.5% 90.4% 77.9%65.0%42.1%Net income 79 171 322 640 887 Growth (%) 204.1% 115.5% 88.1%98.8%38.5%EPS(RMB) 0.08 0.21 0.39 0.77 1.07 DPS(RMB) 0.12 0.23 0.32 P/E(X) 30.65 10.97 6.04 3.04 2.19 ROE (%) 52.2% 69.2% 38.3%40.0%39.3%Source: Company data, CMS (HK) estimateBuy (Initial Coverage) TP：HK$ 5.51 Current price：HK$2.67 China Merchants Securities (HK) Ivy Zhao 0755-25310166 zhaox@cmschina.com.cn 08 Jun 2010 Key data HSI Index 19421.64HSCEI Index 11061.84S/O（mn） 8.2S/O (HK)（mn） 829Mkt cap (HK) (mn) 2213Major share holder Holding (％)Haolin International 61.53%Free float 27.61%Industry Textile productShare performance %1m 6m12mAbsolute return -3 -3-3Relative return -1 8-5 -100102030Jun-09Sep-09Jan-10May-10(%)01863.HKHSI Index Source：Bloomberg Related research The leader of reinforced materials and its related products 请务必阅读正文之后的免责条款部分 1 of 35公司报告思嘉集团(01863.HK) 思嘉集团有限公司（“思嘉”或“公司”）是目前最大的强化材料制造商。公司生产销售的主要产品为强化材料、常规材料和终端产品，如：气密性材料、充气材料、涉水防护服和充气艇等，公司80%以上的产品目前属替代进口型。公司主要产品按09年销售额计算其市场占有率为市场排名第一，可以说是目前中国强化材料及系列产品的“领头兵”。截止09年12月31日，公司的总资产和净资产分别为4.7亿元（非特别说明指人民币，下同）和3.5亿元。我们预测公司2010年和2011年销