Fixed asset investment and infrastructure construction in the 4 trillion investment in a substantial increase makes the level of gross margin and net profit margin of company welding consumables rebounded significantly, the gross margin back up to the middle of last year to 15.2%, up 2.6 percentage points over last year. The net profit margin increased to 4%, an increase of 1.5 percentage points over the end of last year. Along with the deepening of the infrastructure construction in the second half, the company's welding consumables profitability is expected to further enhance.
Convertible bonds the project to reduce the financial cost of new projects in 2010 contributed revenue. Company Announcement issue of convertible bonds, is expected to raise 265 million yuan of funds each year to reduce finance costs of nearly 13 million yuan. Flux Cored Welding Wiresproject to raise funds for the investment of 400 million tons, is expected to be gradually put into operation in the coming year, along with the existing 10,000 tons of flux cored wire production (the first half output of 05,000 tons) is projected to 2010 four-quarter, the company will form the 50,000 tons of Welding Electrode  production, full production contributed revenues of 550 million yuan, the gross profit of more than 90 million yuan, will become the next two years, a new growth point.
The conversion price of 14.55 yuan / share, to bring support for the current stock price. The convertible bonds can choose the conversion six months later, the conversion price of 14.55 yuan, the current share price of 13.11 yuan lower than the conversion price, in an effort to achieve the conversion, the company will enhance the attention on the secondary market, and strive to improve their performance. We believe that current valuation levels and performance growth is expected, the stock rose to more than the conversion price, convertible bonds exercised the possibility.
Various types of welding consumables produced over 180,000 tons in the first half is expected is expected to reach 350,000 tons, 310,000 tons more than we expected. 2009 welding consumables demand is expected to beyond what we expected to reach 4 million tons (formerly the expected 3.53 million tons), an increase of 11%. The company production capacity of 360,000 tons, are basically at full capacity, the downstream demand and structural adjustment of the company's products, company profitability in the second half of the year is expected to exceed the first half.
Raised profit forecasts, a valuation of 18 times, maintaining an "overweight" rating. By 09-11 year EPS to 0.68,0.90 and 1.09 yuan (the original forecast 0.55,0.75 and 0.92 yuan), the current stock price corresponds to a PE of 18 times and 15 times, in the middle reaches of the low-end manufacturing valuation level, we conservatively 2009 to give the company 25 times PE, the target price of 17, maintaining an "overweight" rating.