Sino Grandness

Sino Grandness: Announced a strong set of 2Q13 results which was in line with bullish estimates, with net profit at Rmb102.7m (+24% y/y, +46% q/q) taking 1H13 net profit to Rmb173m. The strong show was in tandem with a robust top-line with revenue at Rmb 595.2m (+27% y/y, +58% q/q) led by an increase in sales of beverage (+48% y/y) and canned products in domestic markets (+34% y/y), partially offset by a 0.7% decrease from sales of canned products in overseas market. The increase in sales volume of beverage and canned products in domestic markets was attributed to the expansion of distribution network in PRC. Overall gross profit margin (GPM) improved by 0.4 ppt to 37.6% in 1H13, mainly attributable to an increase in the GPM of beverage segment, partially offset by a decrease in GPM of domestic and overseas canned product segments. Going forward, the Group remains optimistic about its overall performance in FY13 and remains optimistic about the long term growth prospects of its own-branded Garden Fresh juices and its own-branded Grandness canned products sold in the PRC. Overall, Maybank-KE note that Sino Grandness’s listing of its juice business unit remains on track, as Rmb250m profit target should be achievable. Although the company does not disclose the net profit for beverage sector, house estimate the number to be around Rmb110m and assume stronger beverage sales in 2H13, on back of the stronger summer season and the new distribution network. Conclude that the investment story on Sino Grandness remains, with the value unlocking via Garden Fresh spinoff intact. The next step will be appointing investment bankers, which we expect to finish in the next two months. Latest brokers ratings as follows: Maybank-KE maintains Buy with $1.89 TP