China Animal Healthcare

China Animal Healthcare: 1Q12 adjusted net profit of Rmb38m (+8% YoY; -31% QoQ) was below estimates on lower GP Margins and higher interest expenses that were partially mitigated by higher rev of Rmb172m. DMG note that grp’s share price performance had been lacklustre over the past year as its earnings disappointed for four out of the five quarters since 1Q11. Given a lack of upside catalysts, revise down target multiple to 3.7x FY12F EV/EBITDA (previously 4.6x), which is at -0.5STD to its historical mean of 4.6x. Nonetheless, key re-rating catalysts could come from better use of its huge cash pile of Rmb800m e.g. through special div and/or share buy-back. House Maintain BUY at lower TP of $0.28.