Sino Grandness

Sino Grandness: Announced good set of results, which was in-line with bullish estimates. Rev at Rmb273.0m, +42.3% yoy and -3.8% qoq, while net profit at Rmb44.6m, +13.1% yoy and -17.6% qoq. Gross margins at 34.4% remained healthy vs 33% yoy and 35.5% qoq and grp appears on track to deliver a yr of record profits and meet analyst estimates.

Strong performance was primarily due to strong orders of grp’s own-branded bottled juices for beverage segment and expansion in gross profit margin, as beverage sales at Rmb98.8m, +76.1% yoy and +2.7% qoq, while grp recorded higher sales across all its other product segments, with asparagus, Long beans and Mushroom sales for 9M11all up btwn 39.4-54.4%, as production capacities and distribution network increases.

Going forward, grp remains optimistic about the growth prospects of the fruit and vegetable juice mkt in PRC and will capitalize on the potential growth opportunities ahead and focus on three key areas, namely A&P activities to further increase awareness and brand value, sales and marketing efforts to expand its distribution network in the PRC market and R&D efforts to expand its range of juices in order to appeal to a broader range of consumers.

We note that grp’s balance sheet remains strong, with net gearing at a low 13.2%, while at current price, valuations are compelling, with grp trading at an annualised 3.2x FY11E P/E.