Jinyi Industry: Transformation to High-end Fastener Market

Jin Yi Industrial Company transformed into a high-end fastener market. Among the company’s fastener products, sales of high-speed fasteners accounted for about 50%, automotive fasteners accounted for about 10%, and general fasteners planned to develop new high-end markets such as wind power, aerospace and other high-speed railways, automobiles, high-end equipment, etc. High-end products are the key development areas for the company's future.

High-speed rail fastener related products will maintain stable development.

(1) The company's high-speed rail fasteners are expected to have sales of approximately 1.5 billion yuan this year, a year-on-year growth rate of approximately 10%; the growth potential of heavy-haul railways and rail transit is expected to open up in the future.

(2) Railway infrastructure investment will be reduced by 100 billion yuan this year. It will affect the company’s tendering and product revenue confirmation in the short term; the medium- and long-term investment plans of the industry will not change and will maintain stable growth. The automotive fastener market entered a rapid growth period.

The company's automotive fastener business maintained a sustained and rapid growth. In 2010, its sales revenue was approximately RMB 180 million. It is expected to grow by approximately 50% in 2011 and the average annual growth rate of sales revenue in 2012-2013 is expected to be 30%-50%. From manufacturing to service-oriented enterprises, there is huge room for growth.

Major risk factors: lower than expected railway construction planning, reduction of major shareholders, etc.

Earnings Forecast and Valuation: It is expected that the company's EPS in 2011-2013 will be 0.45, 0.59, and 0.77 yuan, respectively, and the corresponding price-to-earnings ratios will be 40.7, 31.2, and 23.7 times, respectively, giving a cautiously recommended investment rating.