XinRen

XinRen: Announced FY11 results which saw overall-bottom-line, in-line with estimates, helped largely by lower tax rates, despite sluggish top-line performance. 4Q11 rev at Rmb1,486.5m, -24.6% yoy and +0.4% qoq, while net profit at Rmb62.8m, -49.7% yoy and -34.3% qoq. Result brings Fy11 Rev to Rmb6,845.7m, +10.2% yoy and net profit to Rmb421.8m, +10.6% yoy. Gross margins decreased further at 9.8% vs 12.5% in FY10.

YoY rev increased was largely contributed by an increase of 60.2% in the trading of aluminum products to meet shortfalls resulting from Grp’s 59.7% higher export sales tonnage of 99,000MT in FY11. Grp also benefited from a 0.9% rise in rev from its fabrication division on both steady sales vol and ASP, which helped to offset the 5.3% decline in smelting rev which was affected mainly by a 4.3% lower ASP of Rmb15,600/MT for FY11.

Bottom-line was largely boosted by a drop in taxation of 59.7% to Rmb82m, attributed mainly to lower income tax rate applied because one of the Group’s subsidiaries obtained the status of a high-tech Co.; and (ii) the Group’s holding Co. obtained a tax incentive. Furthermore, there was a Rmb40m reversal of tax provision for Grp’s subsidiaries as a result of overprovision in prior years.

Going forward, grp note that operating conditions remain competitive and strategic investments to expand capacity and be even more cost efficient in its operations will set XinRen in a good position to ride this upturn.

As anticipated by investors, grp has proposed a div of 2c/share, representing a 5.1% yield. At current price, grp trades at 5.2x P/E, while net gearing is a tad high at 82.7%. Grp also announced that it will be exercising its call option to acquire shares in China Leading International for a consideration of Rmb1,890m, in a bid to expand its smelting capacity.