Monday, October 24, 2011

China XLX

China XLX: 3Q rev at $1.1b +41.0% yoy +13.5% qoq with net profit at $127.1m up more than 2 fold yoy and qoq. The increase this quarter was due to higher sales volume after a 3rd plant was completed in April 2010 and new compound fertilizer plan in Aug 2010. Overall gross profit margins are up from 13.0% in 2Q to 19.8% in 3Q largely attributed to compound fertilizer segment. ASPs for compound fertilizer rose 28.1% compared to costs which were up 21.2% due to co purchasing a portion of raw materials before prices increased.

Co expects strong government support for the agriculture sector and high food prices which will benefit the chemical fertilizer industry as well as coal prices to remain stable. Expansion plans include a cooperation framework with the Xinjiang govt and an expected 4th urea plant. China XLX now trades at current P/E 7.3x

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