Yamada

Yamada: Announced very strong 2Q11 results which exceeded estimates. Rev at Rmb 218.2m, +89.1% yoy and +560% qoq, while net profit at Rmb 73.2m, +78.6% yoy and +1825% qoq. Gross margins slightly contracted to 40.5% in 2Q12 vs 41.3% yoy. Result brings 1H12 Net Profit to Rmb77.4m, +79.5% yoy.

Growth in earnings was mainly attributable to strong sales order momentum for self-cultivated edible fungi segment and processed food products, with sales of self-cultivated edible fungi surging 130% to Rmb174.5m, largely due to the expansion of shiitake mushroom cultivation base to approximately 5,134 mu* in 2Q12 vs 2,614 mu in 2Q11, while sales of processed food products increased by 10.6% to Rmb43.7m in 2Q12 from Rmb39.5m in 2Q11.

Going forward, grp remains optimistic on prospects and aims to move down the supply chain through collaborating with newly appointed distribution agents to set up 12 fresh shiitake mushrooms distribution outlets. Grp also plans to commence partial utilisation of its own eucalyptus trees to produce sawdust which are the raw material for the synthetic logs used in the cultivation of shiitake mushrooms which may lead to a potential cost savings.

At current price, grp trades at a mere annualized 2.9x FY12E P/E.