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Midas: Stronger Performance To Come?
Tradeable, Tradeable Ideas | 15 May 2014
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By: Raymond Leung
Articles (142) Profile
  1. Midas’s performance fell short of consensus estimates despite reversing losses suffered in 1Q13 (RMB4.9 million). For 1Q14, Midas recorded net profits of RMB11.5 million.
  2. Higer operating costs pulled down profit margins. Higher costs largely due to startup costs from two new plants.
  3. Outlook for Midas still positive due to investments by the Chinese government in rail.

Analysts updates on Midas Holdings.
Analysts updates on Midas Holdings.

Midas Holdings (Midas), a manufacturer of aluminum alloy extruded products and railway related equipment has released its 1Q14 results.

Midas’s performance fell short of consensus estimates despite reversing losses suffered in 1Q13 (RMB4.9 million). For 1Q14, Midas recorded net profits of RMB11.5 million.

The gains were mainly attributed by the group’s aluminum alloy extruded products which saw a 51.4 percent increase in revenue. Midas’s associate company, Nanjing SR Puzhen Rail Transport (NPRT) which produces train cars, contributed RMB13.1 million to the group.

However, higher operating costs pulled down its gross profit margin to 24 percent from 25.3 percent a year ago. The higher costs were largely due to the startup costs from its two new plants; Jilin Midas Light Alloy and Luoyang Midas.

The two new plants will increase Midas’s ability to take up more orders following the group’s strong order wins this year. As at 31 December 2013, Midas’s order for aluminum alloy extruded products stood at RMB 959 million.

Orders for its joint venture, NPRT remain forthcoming as it won a contract which was worth RMB1.11 billion earlier this year.

Outlook for the company is positive as Chinese national railway operator, China Railway Company announced that it will increase its investments in railway fixed asset to RMB 800 billion from RMB 640 billion for 2014.

Infrastructure construction such as railway construction will remain as the main focus in the 12th five year plan as announced by the Chinese government.

At the same time, the Chinese government has taken the initiative to spur the increasingly weak domestic economy through mini stimulus packages. Midas is well positioned to reap the benefits from such stimulus which is mainly through investments in infrastructure.

Analysts from various research houses expect the group to perform better in the future as they continue to deliver its orders. Given its positive outlook, Midas has an average potential upside of 31.1 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

Midas Hldgs  -- -- --   
Business: Manufacturer of aluminium alloy extrusion products for China's rail transportation sector. [FY16 Turnover] Aluminium alloy (99.3%), polyethylene pipe (0.7%).

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