DBS "70% upside from 2.11" Price Target : 12-Month S$ 3.60 (Prev S$ 3.00)
Reason for Report : 2Q07 Results ..
Story: Jiutian posted a decent set of 2Q results that were in line with our expectations. Net profit registered an impressive y-oy growth of 43% to RMB 18.7m attributed to strengthening in ASP of DMF and continuous improvement in the production process. ..
Point: Together with the results, Jiutian announced the successful completion of its new 120,000-tonne DMF facility. The on-time completion reaffirmed the company’s high commitment in promised delivery and further boosts our confidence in their earning executions. We believe this would mark a breakthrough for Jiutian, being capable of operating the world’s single largest DMF production line. ..
Relevance: As the successful completion of the new plant removed one of the uncertainties contributing to execution risk, coupled with potential M&A underpinning strong growth prospect, we have raised our valuation peg from 12x to 15x 08 PE. This translates to an undemanding 0.25x PEG over our 60% FY06- 09 EPS estimates. Accordingly, our TP is revised to S$3.60.
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