Sino Grandness

Sino Grandness: Announced very strong record 2Q11 results which was above estimates.

Rev at Rmb283.9m, +70.1% yoy and +59.8% qoq, while net profit at Rmb54.1m, +57.9% yoy and +73.2% qoq, Gross margins also registered improvement at 35.5% vs 31% yoy and 34.8% qoq.

Strong results driven across all core products, in particular grp’s beverage segment, which saw rev +128.1% yoy and +20.3% qoq to Rmb97.3m (and now contributes to abt 35% of grp’s total rev), with positive responses from distributors and consumers exceeding expectations. Sales of Asparagus, +64% yoy as grp continued to gain mkt share, while Mushroom Sales +27.7% due to exemptions from anti dumping in tariff in Australia.

Grp’s improvement in Margins due largely to higher ASP’s and increase in beverages margins on back of increased economies of scale. Going forward, grp remains confident of prospects and plans to increase demand of its beverage products, and build its own juice concentrate production and bottling facilities, while expanding distribution net works to other PRC provinces. Grp has guidance for 2H11 rev to exceed 1H11, as it is seasonally a stronger period for its export business. At current price, valuations are very compelling, with grp trading at a conservative 2.6x FY11E P/E.