MIDAS HLDGS LIMITED
5EN.SI
Midas Holdings (MIDAS SP) - Strong 2Q Earnings Point Towards Sustained Earnings Recovery
- Midas Holdings' 2Q17 earnings rose 197% y-o-y to RMB56m, on revenue growth of 32% to RMB506m.
- Diversification efforts paying off as new Stretched Plates division contributed to both top and bottom lines.
- Midas is on track to meet our full year forecasts; earnings recovery can be sustained.
- Maintain BUY, TP S$0.36 (0.8x P/B).
What’s New
- Midas reported a strong set of 2Q numbers, with net profit up 197% y-o-y to RMB55.5m on revenue growth of 32% y to RMB506m.
- Gross profit rose 49% y-o-y to RMB159m on gross margin improvement of 3.6ppts to 31.4%.
- Revenue improvement was led mainly by contribution from the recently acquired Stretched Plates business while the Aluminium Alloy business also enjoyed better gross margins y-o-y.
On track for sustained earnings recovery.
- At half-time, Midas’ net profit rose 185% y-o-y to RMB82m on revenue growth of 32% to RMB904m, with gross profit up 34% to RMB270m (GP Margin rose 0.6 ppt to 29.8%).
- Finance costs rose 52% y-o-y to 84m, offset by forex gains of RMB19.4m arising from USD denominated MTNs, while associate contribution from Nanjing Puzhen rose 45% y to RMB19m. Meanwhile, taxes were lower by 44% y-o-y to RMB14m.
- The results are in line with our expectations, and indicate the group is on track to see a sustained rebound in earnings as efforts to diversify its business pays off.
- Results as at 1H17 make up 48% of our full year forecast, with second half expected to be better than the first half.
- Midas also announced that it had won high speed railway contracts worth RMB184m for delivery in 2017, indicating that demand for its products remain firm.
- As such, we maintain our BUY call and TP of S$0.36 (based on 0.8x P/B against 4% ROE)
Paul YONG CFA
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2017-08-16
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