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The Potential Increase Of Warp And Weft Textile Is 58%

2011/2/8 17:55:00 64

Jingtian textile machinery (00350) is mainly engaged in textile machinery business.

But since the acquisition of Zhongrong International Trust Co's 36% stake in the fusion company and become its largest shareholder, the new business has been overwhelming and its share price has more than doubled.

Well, is latitude and longitude still investment worth? We can see from two aspects of opportunity and risk.

Warp and weft

Spin

The old business is not good enough. Its bright spots are mainly concentrated in the Central Bank of China.

Zhong Rong Guoxin

The scale of trust assets management is second in the whole country. According to the information of the stock exchange, the annual profit of 2010 is 690 million, an increase of 122.5% compared with the same period last year, and the stockholders' equity is about 1 billion 525 million, an increase of 117.6% over the same period, and the development potential can not be ignored.

Domestic trust companies are still in the early stages of development, and in the case of low base, asset management scale or profit growth are multiplying.

At present, there are 62 trust companies in China, none of which is listed in Hong Kong, and the financial trust company is the only domestic trust company that can indirectly invest in Hong Kong.

Although industry prospects are attracting, there are challenges in the short term.

In August last year, the China Banking Regulatory Commission launched the "trust company's net capital management measures", requiring domestic trust enterprises to raise net capital and venture capital.

In order to maintain the scale and growth of the business, all major trust companies, including China Credit Corporation, have the need to raise funds.

Therefore, the market conjecture that the latitude and longitude will bring

textile machinery

The business is sold to Lixin Industrial (00641), which is about to become the company of Heng Tian, in order to raise the share capital and make a formal pformation.

On the other hand, in order to oversee the risk of bank lending, the CBRC has just launched a new regulation in January this year, requiring banks' credit cooperative assets to be pferred from the balance sheet to the table within two years, and the provision will be made according to the provision coverage rate of 150%, which will enable the trust companies to readjust their business structure.

The two regulations will have a blow to the whole short term business of the trust industry.

But stronger enterprises, such as CITIC Trust, Zhongrong Guoxin, Ping An Trust and so on, can take advantage of the market share and start to integrate in the general trend of trust industry weakening and staying strong.

After understanding the opportunities and risks, then consider the valuation, which is mainly divided into two parts: the textile machinery business and the China Rong Guoxin company. The first part is Jingwei's textile machinery business is for the chicken ribs - not too bad, it is also difficult to have too much surprise.

To forecast earnings per share of about 0.17 yuan, and historical average P/E 13 times, the reasonable value is 2.21 yuan.

The second part is that if the business of China's fusion Guoxin is affected by the new regulatory regulations, it fails to expand significantly, and it can only maintain its existing size, with a reasonable value of RMB 5.76 at the time when the market share was 6.3 times.

Adding the above two parts, the target price of Jingwei Textile can be seen at HK $9.17, a potential increase of 58%.