Yamada

Yamada: Announced strong set of results which were within street’s bullish expectations. Rev at Rmb164m, +31.4% YoY and +42.2% QoQ (Largely due to seasonal patterns), while core Net Profit at Rmb63.1m, +20% YoY and +53.9% QoQ. Gross Margins however decreased slightly to 44.9% vs 49.2% YoY, on back of rising raw material cost of processed food, in particular, bamboo shoots and other vegs…..

Strong performance due to higher sales from grp’s self-cultivation segment, which increased 41.5% YoY to Rmb128.1m in 1Q11, as grp increased its cultivated land to 2,614 mu vs 2,213mu in 1Q10, while ASP of shiitake mushroom also rose 6% YoY to Rmb7/kg. Grp’s processed food division saw rev increased by 4.7% to Rmb35.9m due to higher demand from export sales to Jap mkt and higher domestic sales….

Going forward, grp remains bullish on prospects, and will continue to seek expansion of its cultivation base, capacity, distribution and secure upstream supply of sawdust for cultivation of mushrooms. We note that grp’s B/S remains strong, with a Net Cash position of Rmb67.1m, giving headroom for further acquisition/expansion, while at current price, valuations remains compelling, with grp trading at 4x FY11E P/E. Street has a unanimous Buy Call on Stock.