Ai Kang Technology: based on photovoltaic accessories to develop EVA market

Photovoltaic accessories industry leader. The company is mainly engaged in the production and sales of photovoltaic solar accessories, including the aluminum alloy frame and EVA film used in the components, as well as the bracket products used in the system installation. The global sales of solar battery frame are the leading products, and its global market share in 2010 reached 16%.

Customer resource advantages and management advantages enhance competitiveness. The fierce competition in the photovoltaic frame market and the company’s ability to occupy 16% of the world’s share mainly depends on:

(1) Customer resource advantage. Among the top 30 manufacturers of global battery production, the company has cooperated with 19 of them, including Suntech, Sharp and Changzhou Tianhe;

(2) Advantages of the management team. The chairman and general manager of the company is Mr. Zou Chenghui, who has extensive experience in the management and management of the aluminum industry. All management members indirectly hold company shares through Ai Kang Investment, and the management team has strong cohesion and market development capabilities.

New product expansion drives the company's future growth.

(1) EVA film improves profitability. According to the disclosure of the company’s prospectus, the company has signed a 9 million square meter 2011 EVA film supply agreement with Shanghai Sumitomo, Wuxi Suntech, and Jinke Energy, and the sales volume is expected to increase substantially in the future. The gross margin of EVA film products is much higher than that of traditional aluminum alloy frame products (2010(2) support system has a vast market space. Compared to the global aluminum alloy frame and EVA film market, the scale of the stent system exceeds 20 billion yuan. As component manufacturers have begun to enter the field of solar energy installation in order to reduce risks and improve profitability, it is helpful for the company to use the advantages of existing customer channels to achieve further growth in support sales.

Raising investment projects helps accelerate the expansion of new areas. The company plans to invest approximately RMB 473 million in a capacity expansion project for solar cell frames, EVA films and mounting brackets. It is expected that after full production, it will generate an additional annual revenue of RMB 1.29 billion and a net profit of RMB 140 million. (The project construction period is one year. ).

Risk factors. The risk of industrial policy adjustment and the risk of increased competition in the industry.

Earnings estimate and valuation range. The company's 2010 EPS was 0.51 yuan. We forecast the company's 2011-2013 EPS to be 1.17/0.85/1.10 yuan (CAGR 29.4%). After deducting the impact of the transfer of equity gains in 2011, it will be corresponding to a fully-divided EPS of 0.61 yuan. According to Wind's statistics, the forecast price-earnings ratio for listed companies in the PV module industry in 2011 is an average of 25 times. Taking into account the company's EVA film performance flexibility, it is expected that there is still room for upward revision in earnings forecasts. We use a relative valuation method to derive a reasonable valuation range of RMB 17.0-18.00 from 28x to 30x PE in 2011.