According to the Ministry of Industry and Information Technology of thePRC, number of broadband internet household users steadily increasedto 175 million, up 16.8% YoY. With Chinese Government speeding up thedevelopment of the Fiber-to-the-home (FTTH) system and the three majortelecommunications operators speeding up the development of the 4Gcommunications network, optical fiber deployment service industry shouldremain fast growing.
China U-ton Holdings (08232 HK) announced 3Q results. During 1Q-3Q,revenue increased 39.6% YoY to RMB127.5 million, net profit increased28.1% YoY to RMB29.5 million, slightly below expectation. We recently had aconference call with the management and received these updates: 1) grossmargin should recover during 4Q12, 2) the Company had a 25% CAGRtarget of bottom line in FY12-14, and 3) cash from operation was belowexpectation due to a deposit paid for a large new government contract.
Maintain FY12 EPS estimate at RMB0.044 but revise up EPS estimates ofFY13-14 by 2.2% and 2.9% respectively to RMB0.056 and RMB0.064. Beingone of the few first advocators of the mdmc method, the Company couldreceive new contracts more easily than the peers. We apply 12.6x FY13 PERto value the Company at HKD0.88 per share. Maintain “Accumulate”.