思嘉集团调研报告：敞开心扉,检视往绩,共探远景

Please see important notice on the last page. 1 of 10Company ReportSIJIA GROUP CO(01863.HK) On 29th -30th of June, we organized a group investigation to Sijia Group Company (“Sijia” or the “Company”) to search the answers for the questions raised from current market. During two days trip, we visited the Fuzhou & Xiamen factories, reviewed the Company’s past operation & discussed the growing prospects. From questioning to understanding, from negation to believe, though there are still many uncertainties & risks in the future development, we still believe the Company’s strong execution capabilities is able to limit the risks. We remain optimistic view of the Company's prospects, reteraiting “BUY” rating with one year TP of HKD5.51, representing 6.27X2011P/E (12.46X2010P/E). High profit margins can be maintained Through the products mix adjustment & new product lines development, the Company is able to maintain the high level of profitability. According to Belgian Sioen Company’s financaial data during 1993-2009, the gross margin experienced a high growth period in 1997-2000 still able to remain above 50%. Therefore, we believe the Company’s high level of gross margin is reasonable & sustainability. “Passive” sales model has led to low distribution expenses The low distribution expenses was because of less retail staffs & low promotion fees due to Internet & e-commerce accepting orders model. As the volume of end products increasing gradually, the Company plans to accelerate the network expansion rate, thus we expect the distribution expenses will experience high growth rate in the future. The pricing of inflatable boats are reasonable By comparing “Intex” & “Longst” inflatable boat, we found that in terms of product forms & qualities, the Company's inflatable boats are all superior than Intex brand. The Company's end products benefit from their high quality enforced materials, as result of higher bargaining power than the others. Two future development direction First direction is one membrane materials, which are used as construction materials & automotive airbag, part of products will be produced in next year. Second direction is new energy materials, it is currently only at the preliminary stage of R&D. Another important growing driver is biogas business. This not only comply with the new direction for rural development, and also meet the new energy development, environmental protection & low-carbon market trends, the future has great market potential. 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) 32.42 11.60 6.39 3.21 2.32 ROE (%) 52.2% 69.2% 38.3%40.0%39.3%Source: Company data, CMS(HK) estimate Buy (prior：Buy) TP：HK$ 5.51 Current price：HK$2.95 China Merchants Securities (HK) Ivy Zhao 0755-25310166 zhaox@cmschina.com.cn 3July2010 Key data HSI Index 19905HSCEI Index 11247S/O（mn） 828.83S/O (HK)（mn） 828.83Mkt cap (HK) (mn) 2445.05BVPS（HKD） 1.40Major share holder Holding (％)Haolin International 61.53Free float 9.36Industry Textile-productShare performance %1m 6m12mAbsolute return -16 -10Relative return -10 -5 -20%-15%-10%-5%0%5%10%15%20%25%Jun-09Sep-09Dec-09M ar-10Jun-10HSI Index1863 HKSource：Bloomberg Related research 1、 Sijia(01863.HK)-The leader in the reinforced materials and its related products market 2、 Sijia(01863.HK)-Better product performance and acceptance in customers Open the heart to view the track record of exploration vision 请务必阅读正文之后的免责条款部分 1 of 10公司报告思嘉集团(01863.HK)调研报告 6月29日-30日，我们组织了一次联合调研前往思嘉集团(“思嘉”或“公司”)，针对市场上对于公司的疑惑进行针对性的探讨。参观了公司的福州工厂和厦门工厂，回顾了公司2009年业绩和2010年上半年的工作情况，并对公司未来发展前景进行了探讨。经过这次联合调研，大家对公司之前的疑虑基本消除。大家对管理层的热忱和务实的工作态度表示认可。从疑惑到了解，从否定到相信，虽然公司的未来发展仍存在着很多不确定的因素和风险，但我们相信公司较强的执行力可以帮助公司将风险降到最低，对公司未来发展前景表示乐观。我们维持“买入”评级，给予一年目标价5.51港元，相当于6.27X2011P/E (12.46X2010P/E)。 高利润