According to the Ministry of Industry and Information Technology of thePRC,number of broadband internet household users steadily increasedto189millionfor FY13, up 7.8% YoY.With Chinese Government speedingup the development of the Fiber-to-the-home (FTTH) system andincreasingspending in information technology consumption, optical fiber deploymentservice industry should remain fast growing.
China U-ton Holdings (08232 HK) announced FY13 results, revenueincreased 53.3% YoY to RMB378 million, net profit increased 29.7% YoYto RMB85 million, in line with expectation.Gross margin declined 5.3 pptsYoY to 39.1%. However, risk for further substantial decline should be verylow. The Company is developing new telecommunications products andsolutions and should be released soon.In addition, the Company operatingcash flowturned positive in FY13 (estimated at RMB40 million, from –RMB31million in FY12).
Raise EPS estimates of FY14-15 by 6.1% and 5.8% respectively toRMB0.070 and RMB0.091, and initiate that of FY16 at RMB0.109. Newtelecommunications products and solutionsshould continue to drive earningsgrowth and increase valuation.Raise the TP to HKD1.81, representing20.1x/15.3x/12.8x FY14/15/16 PER, and 0.7x PEG. Maintain“Accumulate”.