World Precision

World Precision: World precision’s (WP) wholly owned subsidiary World Heavy Machine Tools (WHMT) in China has recently been accredited as a “High/New Tech Enterprise” (HNTE) by Jiansu Ministry of Science and Technology Department. With the accreditation as a HNTE, WHMT will enjoy a preferential tax rate of 15% (vs 25% before) from 2013 to 2015. WHMT manufactures the JS 31 model series of high tonnage stamping machines to cater to clients who require high performance in their respective industries such as auto parts, aerospace, locomotive and oil and gas. WHMT is WP’s 3rd subsidiary to be accredited as HNTE in 3 years and the JS31 model is recognized as one of the significant scientific and technical products from the Chinese government. Last month, WP had secured an order from Baosteel Meiwei Wheel for delivery of 13 units of JS 31 models. Lim & Tan note that the latest preferential tax rate of 15% from 25% previously would raise our net profit estimate of Rmb100mln this year to Rmb110mln, giving a forward PE of 7.5x which is about in line with its 5 year historical average PE of 8x. Meanwhile, UOB Kay Hian maintains Buy with $0.54 TP. House note that World Precision has benefitted from the pick-up in the automobile sector and has made announcements on sizeable orders from Chongqing Baosteel Meiwei Wheel and a supplier to Dongfeng Yueda Kia Motor. Its orderbook has increased from Rmb118m at end-Feb 13 to about Rmb180m at end- Mar 13. Expect full quarter impact of recovery in 2Q13.