Sino Grandness

Sino Grandness: Reported a strong FY10 Rev, which were broadly in-line with estimates. Rev at Rmb645.1m, +43.2%YoY, while Net profit at Rmb116.9m, +76.7%YoY, vs consensus estimates of Rmb110m....

Performance primarily driven by higher orders for all product segments. In particular, sales of beverage segment comprising, which surged 246.4% to Rmb179.6m from Rmb51.9m, due to the successful commercialization of new products and sustained expansion of the Grp’s distributor base. Sales of canned fruits and vegetables were also higher across the board due to increased production capacities and higher orders from existing major customers....

Overall gross margins increased slightly to 32.5% in FY10 from 32.2% in FY09, while on a segmental basis, beverage segment and others segment saw margin improvement while asparagus, long beans and mushrooms segments reported lower gross margins, partly due to higher cost of raw materials. Beverage segment gross profit margin surged the most, jumping to 37.6% in FY10 from 25.8% largely due to economies of scale....

Going forward, Grp expects growth to be underpinned by the new in-house brand of fruit and vegetable juices which have received positive response since they were launched . To capitalize on growth opportunities, Grp will continue to focus on advertising and promotional activities to increase awareness and brand sales and marketing efforts to expand distribution networks....

At current price, valuations appear undemanding, with grp trading at an undemanding 5.8x FY10 PE vs peers average of 9.5xPE. Grp has proposed a dividend of Rmb0.044 (S$0.01).