Sino Grandness

Sino Grandness: Announced results which saw muted top-line performance but strong bottom-line which were ahead of estimates. Rev at Rmb285.5m, +60.7% yoy and flat qoq, while net profit at Rmb56.7m, +81.4% yoy and +162.5% qoq. Gross margins improved at 37.5% vs 34.8% yoy and 33.1% qoq. Performance was mainly fuelled by grp’s beverage segment, with saw rev at Rmb158.9m (56% of grp’s total rev), +198% yoy and +27% qoq, helped by grp’s ability to secure new distributors to market its juices in existing and new provinces in the PRC. While grp also managed to successfully bring down SG&A in the qtr. Sales of grp’s canned vegetables division was however muted due partly to seasonal patterns, whereby the 1H11/12 typically sees weaker export vs 2H11/12 and enters the seasonal stronger period for export business, although we caution that sales for this division appears sluggish in recent qtrs. Going forward, grp remains optimistic about overall growth prospects and has successfully doubled its Garden Fresh bottled juices output capacity to 140,000 ton p.a. rom 70,000 ton p.a by securing a second external supplier based in Zhejiang Province. At current price, grp trades at an annualized just 2.6x FY12E P/E.