According to the MIIT of the PRC,the number of broadband internethouseholdusers steadily increased to 175 million in 2012, up 16.8%YoY. With Chinese Government speeding up the development of theFiber-to-the-home (FTTH) system andthe three major telecommunicationsoperators speeding up the development of the 4G communications network,optical fiber deployment service industry should remain fast growing.
FY12 revenue increased 52.3% YoY to RMB246 million and net profitincreased 18.6% YoY to RMB66 million, in line with expectation.Optical fiberdeployment services revenue increased 46.7% YoY to RMB165million,ofwhich deployment services with micro-ducts mini-cables method(mdmc) revenue grew 83.1% YoY to RMB104 million. We expect mdmcrevenue CAGR can reach 31.0% in FY12-15. Although low-voltageintegration services revenue increased 76.9% YoY to RMB72 million, weexpectits revenue growth will slow down toasingle digitratein FY13-15 dueto resources reallocation.Despite pressureon gross margin, we expect grossmargin could maintain at over 40% in FY13-15.
Maintain FY13 EPS at RMB0.055 but raise EPS estimate of FY14 by 9.0% toRMB0.070. Initiate EPS estimate of FY15at RMB0.087.Estimatesdonotinclude possibleacquisitions,which could further drive EPS CAGR.We apply15.0x FY13 PER and 0.6x PEG to arrive at a TP of HK$1.05. Risks includebelow expectation gross margin and below expectation cash fromoperation.