Midas Holdings (MIDAS SP) - DBS Research 2017-08-16: Strong 2Q Earnings Point Towards Sustained Earnings Recovery

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.

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.

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 DBS Vickers | http://www.dbsvickers.com/ 2017-08-16

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.360 Same 0.360