On October 27th, Dehao Runda announced the third quarterly report. The report shows that the company achieved operating income of 1.927 billion yuan from January to September, a year-on-year increase of 53.82%; net profit attributable to shareholders of listed companies was 224 million yuan, an increase of 643.20%; basic earnings per share was 0.69 yuan, an increase of 666.67%.
The main financial indicators in the first quarter continued to improve: the company's operating income from July to September reached 853 million yuan, a year-on-year increase of 51.85%, a year-on-year increase of 35.15%; the net profit attributable to shareholders of listed companies was 203 million yuan, an increase of 623.62% year-on-year and a growth of 1678.89%; Operating cash flow was 338 million yuan, a year-on-year increase of 467.59%, an increase of 333.92%.
The high subsidy became the main source of profit contribution in the third quarter: During the reporting period, the company's wholly-owned subsidiaries Wuhu Dehao Runda and Yangzhou Dehao Runda received the government's “three science and technology†subsidies of 2.52 and 0.13 billion yuan respectively. The above subsidies led to a significant increase in non-operating income of 4487.23% year-on-year, which significantly increased net profit. The high subsidy was very obvious for the company's performance.
During the period, the expenses increased: As the company increased its investment in the LED business, the administrative expenses and financial expenses increased by 46.87% and 176.32% respectively. In addition, due to the subsidiary Shenzhen Ruituo sponsoring the World Expo display rental business expenses of 100 million yuan, This resulted in a year-on-year increase in sales expenses of 113.84%.
The pace of LED business expansion has further accelerated: since the company's transformation of LED business, its expansion speed has obviously accelerated. During the reporting period, the company reviewed and approved the second extraordinary shareholders meeting on August 3, and Wuhu Dehao Runda signed 70 and 30 MOCVD equipment purchase contracts with Veeco and AIXTRONAG, respectively, for a total amount of no more than 261 million. The US dollar will be delivered in batches before the end of 2011; Yangzhou Dehao Runda and US Veeco will sign 30 MOCVD equipment purchase contracts with a total amount of no more than US$77 million, which will be delivered in batches by the end of March 2011.
The company's expectation of 2010 operating results: the net profit attributable to shareholders of listed companies increased by 360-390% year-on-year, and is expected to be between 22536-24006 million yuan.
Investment Proposal and Earnings Forecast: We believe that the company's third-quarter results exceeded expectations due to high subsidy factors.
To this end, we raise our earnings forecasts. Based on the company's forecast of net profit growth in the third quarterly report, the EPS of the company is expected to be 0.72 and 1.12 yuan in 10, 11 and 12 years respectively, and the corresponding PE is 26.98 and 17.26 times respectively, maintaining the “Buy†rating.
Risk: The long-term development of the company's LED business remains to be seen.
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