China MinZhong

China MinZhong: Announced strong set of 1Q12 results which was in-line. Rev at Rmb361.4m, +36.8% yoy and -13.2% qoq, while net profit at 93.1m, +77.9% yoy and -3.9% qoq. Lowere qoq rev was largely attributed to seasonal patterns. Gross margins at 40.7% was a significant jump vs 33% yoy.

Strong performance was due to better performance in both the Group’s cultivation and processed business segments, on the back of contributions from new farmland and improved better product mix. Aligned with the Group’s shift towards higher value products, ASP for fresh vegetables produce recorded a 37% increase yoy.

Going forward, grp remains confident of prospects, nothing that despite the global economic uncertainty, demand for vegetables products remains robust, underpinned by population growth, rising urbanization and the increased preferences for healthy dietary eating habits and remains well-positioned to capitalize on these opportunities.

At current price, valuations are compelling, with grp trading at an annualized 3.7x FY12 E P/E vs historical average of 7x.