Including these contracts, we estimate net orderbook to be about S$300m currently. To put things in perspective, we believe Midas’s three extrusion production lines are fully booked till FY10 and 70% booked for FY11. While we have already factored this type of utilization rates in our earlier forecasts due to the expected strong demand, a firm orderbook now has lend greater credence to our revenue and profit models.
Of these contracts, RMB121.8m is for downstream fabrication work. Midas has installed the first fabrication line, which will likely start operations in 2H09. Since this is still a new ventureoperationally, we have adopted a conservative view and our current estimates only factor in the current magnitude of contracts won.
Midas also announced that it has been awarded the International Railway Industry Standard certification, which is the first for a PRC company in its business category. Together with its status as the only highest grade certified supplier to all three major international train manufacturers, we believe that Midas is still ahead of the pack in its arena.
With extrusion capacity largely accounted for, we now believe further upside to our earnings estimate will likely come from 1) Downstream fabrication contracts, 2) NPRT contracts and 3) Possible addition of 3rd and 4th extrusion lines. We have adjusted our FY10 net earnings by 4% and derive a new target price of $1.04, based on 18X FY10 PER.
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