XinRen

XinRen: Announced good 2Q11 results, which was in-line, albeit at the top end of estimates.
Rev at Rmb1.8b, +36.9% yoy and -5.5% qoq, while Net Profit at Rmb150.7m, +478.4% yoy and +33.7% qoq. Gross Margins also improved to 13.6% vs 8.8% yoy and 10.3% qoq.

Grp’s strong bottom-line despite slower qoq turnover was primarily attributed to robust export sales of aluminum plates and favorable ASP during the qtr.
Rev saw turnover for grp’s fabrication segment +35% to Rmb185.1m, mainly owning to higher processing fees charged to customers, while smelting rev +19% to Rmb1.2b due to steeper ASP and buoyant export sales of aluminum plates.

ASP for Grp’s aluminum products rose to Rmb 16,500/ mt vs Rmb 13,000 / mt yoy, while export vol for aluminum plates, jumped from 3,800 mt in 2Q10 to 48,800 mt in 2Q11. Gross margins improved led by heightened production efficiency from the smelting and fabrication segments, partially offset by lower trading margin.

Going forward, grp believe that export sales of aluminum plates will continue to be its star
performer in the 2H11 and remains confident of prospects for the PRC’s aluminum industry experts, with experts tipping Aluminium prices to reach Rmb 20,000 / mt in near term. Barring unforeseen circumstances, Grp remains optimistic about performance in FY11.

Valuations are compelling, with Grp currently trading at 3.7x FY11E P/E vs recent peer listing China HongQuai (HK 1378) at 5.8x.