M28876 Fiber Optic Connectors - Koehlke … Fiber Optic Connectors • 1. M28876 Fiber Optic Connectors
China Fiber Optic | 3777.HK China Puti Building the ... · Fiber Optic, Sunsea (002313.CH),...
Transcript of China Fiber Optic | 3777.HK China Puti Building the ... · Fiber Optic, Sunsea (002313.CH),...
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2 May 2012
Susanna Chui
(852) 2235 7131
Trading data
52-Week Range (HK$)
3 Mth Avg Daily Vol (m)
No of Shares (m)
Market Cap (HK$m)
Major Shareholders (%)
Auditor
Result Due
0.5/1.61
15.23
1,217.3
1,424.2
Zhao Bing (43.22%)
Ernst & Young
1H12: Aug Company description
Founded in 1998, China Optic Fiber is the largest
manufacturer of fiber optic patch cord market in
China, accounting for 21.4% of total sales volume
in 2011. Currently major telecom network
operators in China are its key customers, to which
sales represents 59.5% of total revenue in FY11.
Price chart
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Building the quality fiber cities
Rating Buy Initiation
Target Price HKD 2.21
Current price
HKD 1.17 Upside +89%
All three major telcom operators have issued 2012 capex guidance.
China’s industry-wide telecom capex is expected to increase 12.9% to
RMB347.1bn. We believe China Fiber Optic, the Chinese largest
manufacturer of fiber optic patch cords, of which products are widely used
in the whole fiber optic network, will be obviously a key beneficiary in this
capex boom.
A leading fiber optic patch cord manufacturer
China Optic Fiber is the largest manufacturer of fiber optic patch
cord market in China, accounting for 21.4% of total sales volume in
2011. We believe its leading market position is attributed to its
superior quality of products, time barrier for new entrants, large scale
production and strong relationship with key customers.
Capacity expansion for the robust demand
China Fiber Optic has been running at full capacity since 2009, even
with capacity growing at CAGR of 44.2% in FY08-FY11. Reasons
are being the expanding market size driven by operators’ capex, and
also increasing market share as customers prefer better quality
products. We believe supply tightness will persist, and China Fiber
Optic’s capacity expansion could support 15.0% revenue growth in
FY12E.
Operators say no to jerry-built projects
Fiber optic patch cord only accounts for around 1% of telecom
operators’ capex, but the operators have to pay high maintenance
cost on low quality products. The increasing awareness in quality
has led to fairly stable ASP of the company’s products. The
company is moving upstream to soft optical cable production. China
Optic Fiber’s GPM will rise to 32.3% in FY12E, we believe.
We initiate coverage on China Optic Fiber with BUY
The company is trading at 3.7x FY12E PER., which is 73.5% lower
than 14.0x of 3M (MMM.US), which has the lowest valuation
amongst peers. We initiate coverage on the stock with target price of
HK$2.21, based on 7.0x FY12E PE and 50% discount to 3M to
account for its smaller scale. Our valuation is well-justified by the
forecast of 13.6% CAGR in EPS over FY11-FY14E.
RMB million FY10A FY11A FY12E FY13E FY14E
Revenue 838 1,257 1,446 1,738 1,969
Operating profit 228 326 395 483 550
Net Profit 182 253 310 380 432
Consensus NP 326 405 469
EPS (RMB$) 0.20 0.24 0.26 0.31 0.35
P/E (x) 4.69 3.92 3.71 3.03 2.67
ROE (%) 26.8 20.8 20.3 19.9 18.4
ROA (%) 14.4 11.5 12.5 12.2 12.1
Sources: Bloomberg, CIRL estimates
China Fiber Optic | 3777.HK
China Puti
Page 2 of 17
A leading fiber optic patch cord manufacturer
China Optic Fiber is the largest manufacturer of fiber optic patch cords in China. Fiber
optic patch cords are the devices used to connect fiber optic cables and core
equipments, in the exchanges, central offices, cross connection cabinets, optical
distribution boxes, optical terminal boxes and engine rooms of fiber optic
communication systems.
Exhibit 1: Fiber optic network
Source: Company data, CIRL
Exchange/ Central office
Distribution / terminal box Cross connection cabinet Engine rooms
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Exhibit 2: Fiber optic patch cord
Source: Company data, CIRL
Besides, the company also produces connection and distribution products and
equipment room accessories, including optical distribution frames (ODF), digital
distribution frames (DDF), cross connection cabinet, and optical fiber cable
termination boxes, etc. However, these products are only sold with fiber optic patch
cords for customers’ requirements and accounts for 1.9% of the total revenue.
Exhibit 3: Connection and distribution products and equipment room accessories
Source: Company data, CIRL
Market leader with multiple competitive edges
The fiber optic patch cord market in China is dominated by a few major players, China
Fiber Optic, Sunsea (002313.CH), Centuryman, Longxing and Taiping. Among five of
them, China Optic Fiber is the largest manufacturer in China, accounting for 21.4% of
the total sales volume in 2011. We believe the leading market position is supported by:
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Exhibit 4: Fiber optic patch cord market in China is dominated by a few major players
Source: CCID, CIRL
Superior quality resulting in less light loss
The insertion loss (measuring the loss of signal power resulting from the insertion of a
device) of China Optic Fiber’s main product is less than 0.2dB, while return loss
(measuring the loss of signal power resulting from the reflection) is more than 50dB,
versus below 0.35 dB and above 45 dB respectively of general requirements. The
above figure represents less light-loss and superior quality of the product.
Time barrier for new entrants
Inferior quality of fiber optic patch cord will result in slower speed, higher failure rate
and shortening life of the network. Concerning network quality and potential
maintenance costs, any new entrants will need 5 years to obtain network access
license and qualification from MIIT and operators respectively. The manufacturers
without the license or qualification can only be OEMs of the existing players, which are
running at full capacity.
Strong relationship with key customers
All three major telcom operators are China Optic Fiber’s major customers,
representing 59.5% of total revenue in FY11. The company began to sell to the major
telecom network operators in China since 2001, and established long-term
relationships with them. We believe the strong relationships with key customers can
enable the company to benefit from their increasing spending in upgrading and
expanding their networks.
China Fiber Optic, 21%
Sunsea, 9%
Centuryman, 5%
Longxing, 4%Taiping, 4%
Others, 57%
2011 China Fiber Optic’s market share in China
Marketshare of
thelaregest
two players
are increasing
China Fiber Optic, 19%
Sunsea, 8%
Centuryman, 6%
Longxing, 4%
Taiping, 4%
Others, 59%
2010 China Fiber Optic’s market share in China
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Exhibit 5: China Optic Fiber’s customer mix in FY11
Source: Company data, CIRL
Besides, Mr. Zhao Bing, the chairman and executive director, had worked at
Gaocheng Post and Telecommunications Bureau (now known as the Gaocheng
Branch of China Unicom (762.HK)) from 1994 to 1998. And Mr. Shi Cuiming, the
independent non-executive director, was the chairman of the board and the CEO of
China Telecom (Hong Kong) (now known as China Mobile (941.HK)) from 1997 to
1999, and the executive director and executive vice-president of CU from 2000 to
2004. Key management with years of industry experience enables the company to
gain understanding of the development patterns of the industry and clients as well as
competitiveness in technology.
Large scale of production
The telecom operators often demand manufactures to deliver large volume of fiber
optic patch cords with consistent quality on a timely basis. Scale of production is
thus one of the major consideration factors during telecom operators’ procurement.
Therefore, China Optic Fiber’s winning way is to expand rapidly in response to the
market growth. Its designed annual production capacity has grown from 4mn in 2008
to 12mn in FY11, and is expected to be 18mn in FY12E.
China Telecom34%
China Mobile13%China Unicom
13%
Broadcast and television network
operators6%
Other domestic customers
17%
Overseas17%
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Capacity expansion for the robust demand
China Fiber Optic has been running at full capacity since 2009, even with capacity
growing at CAGR of 44.2% in FY08-FY11. Reasons are being the expanding market
size driven by operators’ capex, and also its increasing market share as customers
prefer better quality products. We believe supply tightness will persist for the company
and therefore China Fiber Optic’s further capacity expansion could support
16.7%/15.0% of sales volume/revenue growth in FY12E.
Intact long-term industry growth potential
In 2011, China had about 127.5 mn 3G subscribers out of a total of 975.7 mn mobile
phone users. While it is more than double the penetration levels a year ago, the
penetration of 13.1% is still low, versus 45.3% in Europe, 29.5% in The Americas and
14.5% in Asia & Pacific. We expect the 3G penetration has a huge room for going up
and will probably increase to ~40% by 2015E, based on the past trend of developed
markets.
Exhibit 6: 3G penetration in China is still low
Source: Company data, CIRL
Exhibit 7: Active mobile broadband subscription penetration
2007 2008 2009 2010 2011E
Europe 13.1% 20.6% 27.6% 35.1% 45.3%
The Americas 8.9% 12.6% 18.3% 25.5% 29.5%
Asia & Pacific 8.3% 9.2% 9.5% 10.7% 14.5%
Africa 1.1% 2.8% 3.7% 5.6% 7.2%
Source: International Telecommunication Union, CIRL
7% 8% 8% 9% 9% 10%11%
12%12%
13% 14% 14% 15%
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2G sub base 3G sub base 3G sub base/ 2G + 3G sub base
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As for fixed line broadband, MIIT has targeted to 250 million broadband users by the
end of 12th Five-Year Plan, averagely covered with 20Mbps+ for urban households,
and 4Mbps+ for rural households. Based on 132.5mn broadband subscribers of CT
and CU in 2011, we expect broadband users to deliver a 17.2% CAGR over
2011-2015E. And operators will bring FTTx (Fiber To The x), which replaces part of
copper network with fiber optic network, to all cities for accelerating broadband speed.
In response to the growing 3G and fixed broadband demand, operators will continue
to increase investment in 3G/4G and mobile networks over the next few years.
Network operators raise capex budget for 2012
In 2012, all three major telcom operators have issued capex guidance. China’s
industry-wide telecom capex is expected to increase 12.9% to RMB347.1bn with
focus on the following areas:
1) CU’s WCDMA (3G) capex increases 66.0% to RMB35.5bn for catering to the
rising data traffic driven by higher penetration of low-end smartphones;
2) CM‘s TD capex surges 91.7% to RMB23.0bn for TD-LTE (4G) migration; and
3) Transmission capex is expected to increase, driven by investment from CM
(48.3% to RMB34.3bn) for preparing high data speed TD-LTE, and CU (66.1% to
RMB25.6bn) for explosive growth of data traffic.
Therefore, fiber optic patch cords, which are widely used in long distance backbone
network, metro level network, wireless access network, and fiber optic access network,
will be on the faster track of growth. CCID also predicts the market size for the fiber
optic patch cords to increase 22.7% to RMB4.48bn in 2012.
Exhibit 8: Telecom operators’ capex is expected to grow 12.9%
Source: Company data, CIRL
146.3 190.2
150.3 159.7 174.1
70.9
112.5
70.2 76.6 100.0
72.0
91.5
70.0 71.3 73.0
-30%
-20%
-10%
0%
10%
20%
30%
40%
0
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100
150
200
250
300
350
400
450
2008 2009 2010 2011 2012E
RM
B b
n
China Mobile Total China Unicom Total
China Telecom Total YoY
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Exhibit 9: Focus of telecom operators’ capex
RMB billion 2008 2009 2010 2011 2012E Contribution 2012E YoY
China Mobile Listco - GSM
Infrastructural networks 79.1 55.6 54.7 73.2 54.1 31.1% -26.2%
Transmission 24.5 29.8 28.6 23.1 34.3 19.7% 48.3%
Plant & infrastructure 10.9 11.6 11.2 11.6 21.1 12.1% 82.5%
Support systems 9.5 10.4 8.7 7.7 10.6 6.1% 36.9%
New technologies & new
businesses 8.2 15.5 16.2 7.7 7.9 4.5% 2.6%
Others 4.1 6.5 5.0 5.1 4.0 2.3% -23.0%
China Mobile Parentco
TD 9.0 58.8 23.0 12.0 23.0 13.2% 91.7%
Railcom 1.0 2.0 3.0 19.2 19.2 11.0% 0.0%
China Mobile Total 146.3 190.2 150.3 159.7 174.1 100.0% 9.0%
China Unicom Listco
Mobile Networks- 3G 36.4 15.7 21.4 35.5 35.5% 66.0%
Mobile Networks - 2G 33.1 20.6 7.5 4.6 3.2 3.2% -30.4%
Broadband & Data 9.1 18.8 22.5 25.7 25.8 25.8% 0.5%
Transmission 18.3 25 17.0 15.4 25.6 25.6% 66.1%
IT & Others 10.4 11.7 7.6 9.5 9.9 9.9% 4.1%
China Unicom Total 70.9 112.5 70.2 76.6 100.0 100.0% 30.6%
China Telecom Listco
Broadband & Internet 22.0 20.6 27.6 33.1 37.8 51.8% 14.2%
Others 26.4 17.5 15.4 16.5 16.2 22.2% -1.5%
China Telecom Parentco
CDMA 23.6 53.5 27.0 21.7 19.0 26.0% -12.4%
China Telecom Total 72.0 91.5 70.0 71.3 73.0 100.0% 2.5%
Total 289.2 394.2 290.5 307.5 347.1 12.9%
Source: Company data, CIRL
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Exhibit 10: Fiber optic patch cord market in China
Source: CCID, CIRL
Large players achieve above industry average growth
Fiber optic patch cords account for a small proportion of value chain, but significantly
influence the whole fiber optic network. It is reported some districts have encountered
network problems, because of low price fiber optic products.
Exhibit 11: News reports concern the quality of fiber optic products
Source: Sina, Sohu, CIRL
1.6
2.3 2.8
3.7
4.5
5.3
6.1
0%
42%
24%
29%
23%
17%15%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
-
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2
3
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2008 2009 2010 2011 2012E 2013E 2014E
RM
B b
n
China market size China (YoY)
Page 10 of 17
The usage life of networks will be much shorter than expected 25-30 years. As a result,
the operators have to pay high maintenance cost on low quality products. And even
after being fixed by replacing inferior devices with quality ones, fiber optic network
have been misunderstood to be unreliable compared with copper network.
Therefore, the telecom operators are getting serious about those problems. We
believe they will probably revisit procurement practices to put more emphasis on the
quality. The large players providing quality products will keep on gaining market share.
China Fiber Optic’s market share in China is also surging (2011: 21.4% versus 2010:
18.6%).
Increase capacity for demand growth
China Fiber Optic is running at full capacity however (18mn sets of sales volume
versus 12mn sets of capacity in FY11). On the back of market growth and gaining
market share, the supply tightness will persist among strong players. The company
originally plans to increase capacity from 12mn to 18mn sets in FY12E. However, the
management has recently expressed concern about the recruitment difficulties in
Shijiazhuang Industrial Park. We expect the actual annual capacity will probably only
rise to 14-15mn in FY12E.
Exhibit 12: China Optic Fiber’s large scale production
Source: Company data, CIRL
Page 11 of 17
Exhibit 13: Production capacity and sales volume
Source: Company data, CIRL (The designed annual production capacity is based on the assumption of operating three 8-hour shifts per day and 22 days per month. The utilization rates exceed 100% because the number of actual production days have exceeded the assumed number of production days)
The new capacity will be taken up by not only telecom operators and cable-TV
broadcasting companies in China, but also customers from overseas. China Fiber
Optic is selling products in New Zealand and Ireland currently and targeting to
penetrate into one new international market each year. We expect further capacity
expansion to support 16.7%/15.0% of sales volume/revenue growth to
21mn/RMB1,445.6mn in FY12E.
Though the competitors are also facing production bottleneck and expanding capacity,
CCID expects its four major competitors’ capacity in 2012 to increase 18.0%, which is
slower than the industry sales growth. Therefore, we believe supply tightness will
persist, providing a favorable market environment for China Fiber Optic to ramp up its
planned new capacity.
4
9 9
12
18
22
25
2
10 11
18
21
26
29
43%
107%120%
149%
116% 116% 116%
0%
20%
40%
60%
80%
100%
120%
140%
160%
-
5
10
15
20
25
30
35
FY08 FY09 FY10 FY11 FY12E FY13E FY14E
mn
se
ts
Production capacity Sales Volume Sales volume/ capacity (%)
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Stable ASP and potential margin growth
Fiber optic patch cord only accounts for around 1% of telecom operators’ capex, but
the operators have to pay high maintenance cost on low quality products. The
increasing awareness in quality has led to fairly stable ASP of the company’s products.
The company is moving upstream to soft optical cable production. China Optic Fiber’s
GPM will rise to 32.3% in FY12E, we estimate.
Stable ASP
China Optic Fiber’ ASP of fiber optic patch cords is fairly stable for the last four years,
with oversea model staying at USD55.0 per set and domestic model even rising from
RMB47.6 to RMB58.6 per set. The price difference between domestic and oversea
models is mainly attributed to higher specifications required (i.e. using glass optical
fibers instead of plastic ones).
Exhibit 14: Stable ASP of fiber optic patch cords
Source: Company data, CIRL
We believe the stable ASP is attributed to network operators’ relatively low price
sensitivity to the products. Fiber optic patch cord market size only accounts for around
1% of telecom operators’ capex. As we have mentioned above, the operators have to
pay high maintenance cost on low quality products. Taking the potential cost of
replacement and reputation damage due to inferior quality into consideration, telecom
operators are concerned more about the quality of fiber optic patch cords than the
price. Therefore, largest players, which are already running at full capacity, can enjoy
stable ASP.
0
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300
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400
FY08 FY09 FY10 FY11 FY12E FY13E FY14E
RM
B p
er
set
Domestic Oversea Model #1 Oversea Model #2
Page 13 of 17
Exhibit 15: Fiber optic patch cord market is small to telecom operators’ capex
Source: CCID, CIRL
Vertical integration enhances margins
Exhibit 16: Cost of key raw materials
Source: Company data, CIRL
Raw material accounts above 90% of China Optic Fiber’s COGS. The principal raw
materials are ceramic ferrules and soft optical cables. The cost of former is stable at
RMB2.1 per unit for domestic model, except rising to RMB2.6 due to Japan
earthquake in FY11. But as for the latter, the cost is fluctuating from RMB0.9 to RMB
1.2 per meter.
1.6
2.3 2.8
3.7
4.5
0.6% 0.6%
1.0%
1.2%1.3%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
2008 2009 2010 2011 2012E
RM
B b
n
Fiber optic patch cord market size
Fiber optic patch cord market size/ telecom operator's capex
2.1 2.1 2.1
2.6
1.2 1.2
0.9 1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
FY08 FY09 FY10 FY11
RM
B
Ceramic ferrules (per unit) Soft optical cables (per meter)
Page 14 of 17
In order to better manage raw material cost, the company has added 4 production
lines of soft optical cables to increase capacity by 400% from 13,000km to 65,000km
per annum in FY11, and plan to add 5 production lines to increase capacity by 100%
to 130,000km per annum in FY12E, bringing the self sufficiency ratio to be 30%. The
management expects GPM to improve by 1 percentage point. We believe continuous
stable ASP, together with vertically integrating to soft optical cable production, will
push up the overall GPM to 32.3% in FY12E
Exhibit 17: China Optic Fiber’s GPM
Source: Company data, CIRL
22.5%26.8% 25.3% 26.2% 27.1% 27.9% 27.9%
59.6%
52.8% 53.9%57.9% 58.8% 59.6% 59.6%
47.6%
31.0% 32.0% 31.8% 32.3% 32.8% 33.0%
0%
10%
20%
30%
40%
50%
60%
70%
FY08 FY09 FY10 FY11 FY12E FY13E FY14E
Domestic Overseas Overall
Page 15 of 17
Financial analysis and valuation
We forecast revenue to grow by 15.0%/20.2%/13.3% for FY12E/FY13E/FY14E,
mainly driven by 1) network operators’ continuous investment drives the industry
growth; 2) gaining market share due to increasing concern on quality of low price
products; 3) capacity expansion to solve capacity bottleneck.
China Optic Fiber’s GPM will go up to 32.3%/32.8%/33.0% in
FY12E/FY13E/FY14E from 31.8% in FY11, thanks to continuous stable ASP and
vertically integrating to soft optical cable production. Despite of setting up new office to
expand market coverage and constructing a new R&D center, SG&A expense relative
to sales will drop from 5.8% in FY11 to 5.0% in FY12E/FY13E/FY14E because of THE
absence of listing expenses. Net profit will rise 22.6%/22.5%/13.5% to RMB310.4mn/
RMB380.1mn/ RMB431.5mn in FY12E/FY13E/FY14E.
Exhibit 18: Key assumption
2010 2011 2012E 2013E 2014E
Fiber optic patch cords
Sales Volume (mn) - domestic 10.2 17.3 20.1 24.5 27.5
Sales Volume (mn) - oversea 0.6 0.6 0.8 1.1 1.5
ASP - domestic 57.6 58.6 58.6 58.6 58.6
ASP - oversea 347.2 347.2 302.7 247.7 207.7
Revenue 785.3 1,233.5 1,416.8 1,704.1 1,929.6
Other products
Revenue 52.8 23.5 28.8 33.9 39.0
Total
Revenue 838.1 1,257.0 1,445.6 1,738.0 1,968.5
GPM
Fiber optic patch cords - domestic 25.3% 26.2% 27.1% 27.9% 27.9%
Fiber optic patch cords - oversea 53.9% 57.9% 58.8% 59.6% 59.6%
Other product 25.1% 26.3% 27.2% 27.9% 27.9%
Overall 32.0% 31.8% 32.3% 32.8% 33.0%
Source: Company data, CIRL
We initiate coverage on China Optic Fiber with BUY. The company is trading at
3.7x FY12E PER., 73.5% lower than 14.0x of 3M (MMM.US), which has the lowest
valuation amongst peers. We initiate coverage on the stock with target price of
HK$2.21, based on 7.0x FY12 PE and 50% discount to 3M to account for its smaller
scale. Our valuation is well-justified by the forecast of 13.6% CAGR in EPS over
FY11-FY14E.
Page 16 of 17
Risk factors
Downside risks include 1) failure to implement expansion plans; 2) lower-than
-expected demand for fiber optic patch cords; 3) more intense competition than
expected from other fiber optic patch cord manufacturers, leading to reduced prices,
gross profit and market share.
Exhibit 19: Financial statements
Source: Company data, CIRL
Exhibit 20: Peer comparison
Source: Bloomberg, CIRL
Income statement Cash flow
Year to Dec (RMB mn) FY10A FY11A FY12E FY13E FY14E Year to Dec (RMB mn) FY10A FY11A FY12E FY13E FY14E
Revenue 838 1,257 1,446 1,738 1,969 Pre-tax profit 212 299 366 449 509
Gross profit (reported) 268 400 467 570 649 Taxes paid (1) (6) (84) (56) (68)
EBITDA 256 366 440 537 611 Depreciation 29 39 45 54 62
Depreciation (29) (39) (45) (54) (62) Associates 0 0 0 0 0
EBIT 228 326 395 483 550 CFO bef. WC change 240 333 328 447 502
Net interest income (exp.) (16) (27) (29) (34) (41) Change in working cap (154) (27) (82) (208) (21)
Associates 0 0 0 0 0 Cashflow from operation 86 306 246 239 482
Exceptionals/others 0 0 0 0 0 CAPEX (105) (233) (100) (161) (125)
Profit before tax 212 299 366 449 509 Free cash flow (19) 73 146 79 356
Tax expenses (30) (46) (56) (68) (78) Dividends (1,155) (51) 0 0 0Minority interest 0 0 0 0 0 Balance sheet adj. (24) (82) 0 0 0
Net profit 182 253 310 380 432 Sharse issued 1,153 289 0 0 0
Dividends -1,206 0 0 0 0 Others 0 0 0 0 0
Net cash flow (45) 229 146 79 356
Balance sheet Net cash (debt) start (100) (145) 84 230 308
Year to Dec (RMB mn) FY10A FY11A FY12E FY13E FY14E Net cash (debt) at year-end -145 84 230 308 664
Cash & equiv 129 582 799 1,010 1,470
Trade receivables 564 751 761 1,057 1,002 Ratios
Other receivables 0 0 0 0 0 Year to Dec (RMB mn) FY10A FY11A FY12E FY13E FY14E
Inventories 25 28 33 40 42 Growth rate (%)
Other current assets 11 23 23 23 23 Revenue 29.8 50.0 15.0 20.2 13.3Fixed assets 472 665 720 826 890 EBITDA 31.7 42.5 20.4 22.0 13.8Intangible assets 16 16 16 16 16 EBIT 33.7 43.3 21.1 22.2 13.9Investment, associates etc 51 133 133 133 133 Net profit 30.8 39.2 22.6 22.5 13.5
Total assets 1,266 2,198 2,485 3,105 3,576 Fully diluted EPS NA 19.6 5.5 22.5 13.5
Margins (%)
Account payables 20 105 37 133 59 Gross margin 32.0 31.8 32.3 32.8 33.0Other payables 0 0 0 0 0 EBITDA 30.6 29.1 30.5 30.9 31.1Short-term debt 274 498 570 702 806 EBIT 27.2 26.0 27.3 27.8 27.9Other current liabs 288 364 336 349 358 Net margin 21.7 20.1 21.5 21.9 21.9
Long-term debts 0 0 0 0 0 Other ratios
Deferred tax and others 8 11 11 11 11 ROE (%) 26.8 20.8 20.3 19.9 18.4Other long-term liabs 0 0 0 0 0 ROA (%) 14.4 11.5 12.5 12.2 12.1
Total liabilities 589 978 954 1,194 1,234 Net gearing (%) 21.4 (6.9) (15.0) (16.1) (28.4)
Interest coverage (x) 14.4 11.9 13.7 14.1 13.5Share capital 0 8 8 8 8 Receivables days 245.5 218.1 192.1 222.0 185.8Reserves 677 1,212 1,523 1,903 2,334 Payables days 12.5 44.8 13.9 41.5 16.4
Shareholders' equity 677 1,220 1,530 1,911 2,342 Inventory days 10.9 8.3 8.2 8.4 7.8
Minorities 0 0 0 0 0 Effective tax rate (%) 14.2 15.2 15.2 15.2 15.2
Total equity 677 1,220 1,530 1,911 2,342
Net cash (debt) -145 84 230 308 664
Price Market cap PE (x) PB (x) Dividend yield (%)
Ticker (HKD) (HKD mn) FY11A FY12E FY13E FY11A FY12E FY13E FY11A FY12E FY13E
China Fiber Optic Patch Cord ManufacturersSunsea-A 002313 CH 29.38 5,876 33.6 24.4 19.0 4.6 3.9 3.2 0.6% 1.2% 1.0%Suzhou New Sea-A 002089 CH 13.62 4,805 22.2 16.6 13.9 3.9 3.3 2.7 0.9% 1.8% 2.3%Jiangsu Wutong-A 300292 CH 19.89 1,327 - 23.2 17.3 - 2.4 2.2 0.0% 0.6% 1.5%Average 18.6 21.4 16.7 2.8 3.2 2.7 0.0 0.0 0.0
Global Fiber Optic Patch Cord ManufacturersAmphenol Corp-A APH US 455.28 74,363 18.9 17.5 15.7 4.4 3.8 3.2 0.1% 0.7% 0.7%3M Co MMM US 693.32 481,077 14.7 14.0 12.8 4.0 3.6 3.2 2.5% 2.6% 2.8%Sumitomo Chem Co 4005 JT 32.03 53,029 23.7 821.4 10.9 1.1 1.1 1.0 2.6% 2.8% 3.1%Tyco Intl Ltd TYC US 446.67 206,747 15.7 15.7 13.8 1.9 1.9 1.8 1.7% 1.8% 2.0%Average 18.3 217.1 13.3 2.8 2.6 2.3 0.0 0.0 0.0
Ch Fiber Optic 3777 HK 1.17 1,424 3.9 3.7 3.0 0.9 0.8 0.6 0.0% 0.0% 0.0%
Page 17 of 17
Rating Policy
Rating Definition
Stock Rating Buy Outperform HSI by 15%
Neutral Between -15% ~ 15% of the HSI
Sell Underperform HSI by -15%
Sector Rating Accumulate Outperform HSI by 10%
Neutral Between -10% ~ 10% of the HSI
Reduce Underperform HSI by -10%
Analysts List
Antony Cheng Research Director (852) 2235 7127 [email protected]
Hayman Chiu Senior Research Analyst (852) 2235 7677 [email protected]
Kenneth Li Senior Research Analyst (852) 2235 7619 [email protected]
Lewis Pang Research Analyst (852) 2235 7847 [email protected]
Susanna Chui Research Analyst (852) 2235 7131 [email protected]
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I, Susanna Chui hereby certify that all of the views expressed in this report accurately reflect my personal views about
the subject company or companies and its or their securities. I also certify that no part of my compensation was / were,
is / are or will be directly or indirectly, related to the specific recommendations or views expressed in this report / note.
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