Dear all

With reference to my write-up on Jiutian posted on my blog on 2 Dec 2020 (click HERE), Jiutian touched an intraday low of $0.066 on 14 Dec 2020 before touching an intraday high of $0.116 on 25 & 26 Jan 2021. At the time of this write-up, Jiutian is trading at $0.101 and is on track to test an important resistance $0.101.

At current levels, Jiutian seems interesting on the following basis:

A) Average selling prices (“ASP”) have improved from the recent low seen in Dec

Based on the DMF price as shown on this website (click HERE), DMF prices have recovered from the recent low of around RMB7,833 to around RMB9,867. This is encouraging and bodes well for Jiutian.

Furthermore, besides DMF, based on channel checks, DMA are also fetching decent prices. With reference to Jiutian’s production flow chart (click HERE), Jiutian has the flexibility to sell more DMA, if DMF price is not so desirable.

B) Chart remains on an uptrend

Based on Chart 1 below, Jiutian is still on an uptrend with broadly rising exponential moving averages. The recent “profit taking” is healthy as Jiutian has moved up 76% from $0.066 on 14 Dec to $0.116 on 26 Jan 21. ADX is around 28, amid positively placed Dis, indicative of an uptrend.

Near term supports: $0.097 – 0.098 / 0.092 – 0.093 / 0.090

Near term resistances: $0.101 – 0.102 / 0.106 / 0.114 – 0.116

Source: InvestingNote 2 Feb 21

C) Analysts continue to be positive with average analyst target price $0.160

Based on Bloomberg (see Figure 1 below), average analyst target price is around $0.160. At the last done price $0.101, this represents a potential capital upside of around 58%. Readers can refer to HERE for the informative analyst reports.

Figure 1: Average analyst target price $0.160; potential capital upside 58%!

Source: Bloomberg 2 Feb 21

D) Valuations remain low based on analysts’ estimates

Based on Bloomberg (see Figure 2 below), analysts estimate that Jiutian may register a FY20F and FY21F net profit of around RMB207m and RMB296m respectively. Based on such estimates, Jiutian will trade at 4.3x FY20F PE and 2.6x FY21F PE.

Figure 2: Jiutian trades at 2.6x FY21F PE

Source: Bloomberg 2 Feb 21

 

Risks

Usual risks include a plunge in ASP, cyclical industry, spike in raw material costs and an overall broad market selloff (given that U.S. markets are trading on stretched valuations) etc.

 

Conclusion

Due to time constraints, I will keep this writeup short. Jiutian is likely to report its 4QFY20F results sometime around end Feb. The above is just a short writeup on my observation in Jiutian. Readers are advised to refer to the analyst reports (click HERE) and my write-up HERE for more information on Jiutian and exercise your own due diligence.

 

P.S: I have already notified my clients to take note of Jiutian for the past few days. I am vested in Jiutian.

 

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Disclaimer

Please refer to the disclaimer HERE