China Minzhong

BNP Paribas initiates vegetable company as Buy with $1.50 target price based on 8X FY11 P/E. Highlights its diversified customer base, demand-driven business model allows it to plan production, cultivation based on customer orders, helps it control input costs. Adds, economies-of-scale, long history of operation make it hard for new entrants to replicate. Forecasts gross margin of nearly 70% in FY10, net profit CAGR of 30% over FY10-12.

Expects China to continue the double-digit processed vegetable export growth given its cost advantages and to position itself as another major consolidator given its strong value proposition. Shares closed down 1.7% to $1.13 yesterday after China reports wholesale vege prices fell 5% from week earlier.