Jiangsu Hongtu High Technology Co. Ltd.

Public (SHA: 600122)

Company Facts

Founded by Jiangsu Hongtu e-Information Group Co. Ltd, Nanjing Cable Electronics Factory, Zhenjiang Jiangkui Group Company, Nanjing Zhongruan Information Engineering Company and Jiangsu Province Electric Industry Technological & Economical Development Company in year 1997, the company was listed in Shanghai Stock Exchange in year 1998.

The company’s main businesses are development, manufacturing and sales of computer, software, system integration and network products, laser DVD players, telecommunication equipments, and optical fiber cable products.

Jiangsu Hongtu High Technology Co. Ltd. is leading company in IT equipment manufacturing industry; which has been awarded ‘Top 500 Made-in-China Enterprise’, the ‘China e-Information Top 100 Enterprise’ and the ‘Chinese Top 100 Technological Enterprise’.

The company has been successful in electricity distribution field; its optical fiber cable business has effectively developed market share in national electricity network, transportation, energy and metal casting industries.  Moreover, the company has excellent performance in consumer electronics field as well; cooperating with world digital TV top-box giant, Hong Kong Tiandi Digital Co. Ltd., the company produces world most advanced digital video broadcasting system which has contributed 189% increase in business income in the first quarter of year 2008 comparing the same with previous year.

In addition, the company focuses on international electronics product market as main profits resources. Because of fierce competition has dragged the profit margin to a very low level in domestic electronics market, the company has extended its efforts to Pan-Asian and European markets, where the competition is less. The oversea sales to European countries have increased from 37% to 79%, which has largely improved profitability of the company.

In domestic sales section, the company mainly depends on retailer chain-stores. Currently, the company has its 169 chain-stores covered Jiangsu province, Shanghai, Anhui Province, Beijing, Shandong province, Fujian and Jiangxi province; is Chinese number one IT chain-store retailer. The company plans to open 500 IT chain-stores by year 2010 and aims sales incomes over RMB 40 billion Yuan.

In addition to physical sales, the company has also developed e-Commerce project, which has combining advantages of Wal-mart, Dell and McDonald’s management and operation modules, and has been highly appreciated by National Development Reform Committee of China.

Financial Overview:

Related companies:

--Holding Shareholder:

Sanbao Group Co. Ltd.

-- Shareholding companies:

Nanjing Hongtu Jinding Real Estate Limited Liability Company.

Jiangsu Sujin Securities Investment Development Co. Ltd.

Huatai Securities Shareholding Co. Ltd.

Nanjing Fushitong Computing Equipment Co. Ltd.

-- Collaboration

Jiansu Hongtian Broad-band Shixun Co. Ltd.

-- Holding Subsidiaries:

Jiansu Hongtu High-Tech Software Engineering Co. Ltd.

Jiangsu Hongtu Jiateng Software System Co. Ltd.

Jiangsu Hongtu High-Tech Real Estate Development Co. Ltd.

Jiangsu Hongtu High-Tech Technology Development Co. Ltd.

Nanjing Yuanxia Industry Co. Ltd.

Hongtu Sanbao High-Technology Shareholding Co. Ltd.

Shanghai Hongtu Sanbao Department Store Co. Ltd.

Nanjing Yuanjiu Real Estate Development Co. Ltd.

Kunshan Hongrui Electric Co. Ltd.

-- Holding Sub-subsidiaries:

Zhenjiang Hongtu Sanbao Technological Development Co. Ltd.

Wuxi Hongtu Sanbao Technological Development Co. Ltd.

Jiangsu Hongtu Kaibo Electric System Co. Ltd.

Suzhou Hongtu Sanbao Technological Development Co. Ltd.

Nanjing Hongtu Sanbao Technological Development Co. Ltd.

Yancheng Hongtu Sanbao Technological Development Co. Ltd.

Anhui Hongtu Sanbao Technological Development Co. Ltd.

Yangzhou Hongtu Sanbao Technological Development Co. Ltd.

Jiangsu Hongtu Xingwang Technological Development Co. Ltd.

Huai’an Hongtu Sanbao Technological Development Co. Ltd.

Nantong Hongtu Sanbao Computing Technological Development Co. Ltd.

Shanghai Hongtu Sanbao Commercial & Trading Co. Ltd.

Nanjing Hongtu Sanbao Technological Development Co. Ltd.

Changzhou Hongtu Sanbao Technological Development Co. Ltd.

Xuzhou Hongtu Sanbao Technological Development Co. Ltd.

Huainan Hongtu Sanbao Technological Development Co. Ltd.

Shanghai Hongtu Sanbao Computing Development Co. Ltd.

-- Actual Controller: Yuan Yafei

As on 8 August, 2008

Open:  15.02   High: 15.20   Low: 13.86   Close: 14.15   Vol.: 2,419,948                  

Key Stats & Ratios

     Unite: RMB 10,000 Yuan

Daily Stats (last one month):

Performance Analysis:

In my opinion, IT plate stocks are one of best choices at the moment, because of IT industry has least been affected by global economical factors such as high petrol price and inflation. For example, the consumption of IT products is continuously increasing: PC sales has increased 12% while mobile phone sales has increased 13.6% in the first quarter of year 2008 corresponding the same period of previous year.

Jiangsu Hongtu High Technology Co. Ltd. has sped up its steps into IT retail market. In order to provide sufficient cash flow for constructing the chain-store network, the company has also invested in real estate business and Huatai Securities. The investment returns from real estate and securities have also improved the business performance while IT chain-store has yet large-scale developed.

Personally, I believe, Hongtu High-Tech has advanced technological advantages, reasonable business structure, multiple sales channels and aggressive business strategy. Although IT products have relatively short life circle and demands large investment in research & development section, I believe the company is very capable in it. Even in such a high competitive environment, the company’s businesses has moved on a fast track growth, especially, factors such as the company’s real estate sales will start in July and Huatai Securities is going to be listed in stock market, will greatly stimulate the stock performance in short and middle term.

Therefore, I would like to suggest this stock to investors, and target price is about RMB 32 Yuan for long term. In addition, I believe this stock is also good for short term investment, as it has shown amazing stability in stock market’s recessions in the past few months, thus, the unique turbulence resistant strength will help investors to secure their investments in current market situation.