quote="ZEN" post=19869]Revenue grew 47% yoy to RMB297m, which was led by a 51% growth in the aluminum alloy segment to RMB296m, which was in turn boosted by higher railway project revenue. Gross profit grew at a slightly lower clip of 39.5% yoy to RMB71m as GP margin fell marginally to 24% from 25.2% a year earlier.
Earnings turnaround led by strong contribution from associate Nanjing Puzhen, where contribution turned from a loss of RMB4m a year ago to a positive gain of RMB11.5m for the quarter.
Our View
Stronger quarters are projected ahead, as the first quarter is seasonally the weakest and more importantly, Midas should be delivering more of its higher margin high speed railway contracts, of which over RMB500m have been won in the last few months. Thus we expect both higher revenue and margins ahead, as compared to the first quarter.
Expect more contract wins to further boost order books. At the same time, as China and its cities continue to construct more metro lines and inter-city high-speed railway lines, we expect Midas to win additional metro as well as high speed contracts to further boost its order books, which we estimate stand at c. RMB900m to RMB1bn currently. We believe the Group should also be winning further overseas contracts as well in the coming months.
Recommendation
Maintain BUY, TP S$0.64. The stock is trading below 1x FY14 P/B, and we see its share price rerating as it executes on its earnings recovery. Our TP is based on 1.2x FY14 P/B.[/quote]
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