cimb的报告：china energy

Within expectations. 3Q07 net profit of Rmb64.7m (+26% yoy) was in line with
consensus and our estimates as lower-than-expected revenue was compensated by
better-than-expected EBITDA margins (3% pts above). 9M07 net profit represents
65% of consensus and 58% of our previous full-year forecasts. We were expecting
a very strong 4Q07 led by capacity expansion.

Sales jumped 37% yoy in 3Q07, driven by a 120% yoy increase in DME output
(100,000-tonne Phase II expansion at Shandong plant completed in Aug 06) and
higher ASPs on the back of rising LPG prices. Completed in Sep 07, CEGY’s Phase
III expansion in Shandong was running at about 40% utilisation.

EBITDA margins remained stable yoy, as higher gross margins (+1.4% pts yoy)
were offset by higher administrative expenses post-IPO. Because of higher
depreciation costs and a 15% tax rate in Shandong (vs. tax exemption in FY06), net
profit rose 26% yoy, less than the topline growth

Short-term margin crunch on higher methanol prices, due to supply disruptions
and outages in global methanol plants. While DME prices had risen in tandem with
crude oil price increases, near-term margins are now expected to contract by 5-15%
pts. Methanol prices are expected to soften in 1Q08, due to slowing demand during
the festive season (fewer working days), the resumption of operations at methanol
plants by end-2007, and surplus supply from a new plant in Oman. CEGY may try to
secure its own methanol supply if prices fail to decline by mid-FY08.

4Q focus on ramping up. The Shandong Phase III plant is on track to reach 70%
utilisation by end-FY07, to account for about 90% of total sales in 4Q07. As for the
Guangzhou plant, management aims for breakeven by end-FY07 (Rmb4m loss in
3Q07) and more significant contributions from 1Q08.

Forecasts reduced; maintain Outperform. We have reduced our FY07-09 EPS
forecasts by 4-39% to factor in lower utilisation rate assumptions for 4Q07, higher
methanol costs for FY07-09, and a longer ramp-up period of six months, vs. three
months previously. Accordingly, our target price falls from S$1.94 to S$1.73, still
based on a 30% discount to our DCF valuation (WACC 13%, LTG 2%) of S$2.48. At
S$1.73, CEGY is valued at 10x CY09 earnings, which we believe is undemanding
against a 3-year EPS CAGR of 55% for FY07-09. Maintain Outperform for its stillsolid
growth fundamentals.