King Kong Glass: Security glass is mainly concentrated in public construction

The results met our expectations. The company achieved operating revenue of 348 million yuan, an increase of 18.04% year on year, net profit attributable to the parent company of 44.473 million yuan, a year-on-year increase of 1.75%, and earnings per share of 0.21 yuan, in line with our adjusted forecast for the third quarter. Profit distribution plan: cash dividend of 0.20 (tax included) per 10 shares.
The price of raw home decor glass in the upstream sector fell, and the performance in the fourth quarter increased significantly. In 2011, the prosperity of the glass industry declined sharply. In November, the average price of float glass fell to the low point of 61.04 yuan/weight in the year, down 23.6% from the beginning of the year. The purchase cost of raw glass used for the company's safety mouthblown glass has been reduced, creating conditions for the increase of gross profit margin. The gross profit margin in the fourth quarter was 37.3%, up 5 percentage points from the previous quarter. Operating revenue and net profit increased by 18.14% and 144% respectively.
The safety machine made glass business is mainly used in public buildings and is affected by real estate regulation. The revenue of safety glass business was 239 million, up 13.3%, accounting for 73% of the company's total revenue. The first phase of the company's investment projects, "Technical Transformation Project of High-strength Monolithic Antimony Potassium Fireproof Glass Production Line" and "Wuling Factory 120m2 Fireproof Production Line", were fully put into operation, doubling the production capacity of safety glass to 2.4 million m2. The company's safety glass is currently mainly used in public buildings. Statistics show that in the first three months of this year, office buildings and commercial buildings increased by 43.4% and 34.2% respectively, far higher than the growth rate of 19% for residential buildings. The company has little influence on the real estate control policy. The total capacity contribution of the Wuling project this year, combined with the low price of the original glass film, will ensure the growth of this year's performance and increase the gross profit margin.
BIPV has fire protection function and is not affected by the economic recession of PV industry. In 2011, the BIPV business income was 64.8844 million yuan, up 26.88%, and the gross profit margin was 34.12%, down 15 percentage points. We believe that under the severe economic downturn in the photovoltaic industry, the company's BIPV glass revenue can still grow. This is mainly due to the company's BIPV has stronger fire resistance and unique characteristics compared with ordinary photovoltaic glass. Meanwhile, the upstream battery has been put into production. This year's BIPV cost advantage will emerge.
With the introduction of fire regulations and documents, the company has ushered in policy opportunities this year. The national standards "Code for Fire Protection Design of Buildings" and "Code for Fire Protection Design of High-rise Civil Buildings" have been approved by Tianjin experts. Industry policies are more explicit. The scope of buildings where fire resistant glass is mandatory will be greatly increased on the existing basis. The construction site will use more fireproof glass, and the fireproof glass market will usher in rapid growth.
Profit forecast and investment suggestions. We expect that the company's earnings per share in 2012/2013 will be 0.29 yuan and 0.38 yuan, up 40.5% and 31.7% respectively, and the P/E ratio in 2012 will be 24 times. In view of the overall release of production capacity this year and the increase of the lower gross profit rate of safety glass raw materials, we will upgrade the rating to "buy".