China Minzhong

China Minzhong: 3Q13 results was broadly in-line, with revenue at Rmb 962.2m, +28% y/y, while net profit at Rmb 255m, +6% y/y and Gross margins at 33.5% vs 41.3% y/y. Result brings 9M13 revenue to Rmb 2.4b, +38% y/y and net profit to Rmb 592.4m, +17% y/y. Strong revenue for the quarter was underpinned by better performances in both the Cultivation and Processed business segments. Revenue from Cultivation business segment rose 36.0% y/y on the back of improved yield and maiden contributions from new farmland that had yet to turn productive last year. Within the Processed business segment, revenue from processed vegetables improved 22.1% on the back of strong demand from the export markets, while revenue from other processed products also increased 51.5% to RMB48.2m, on the back of strong domestic demand for the Group’s branded products such as vegetables and fruits beverages. Bottom-line was however impacted by a 7.8 ppt slump in gross margins to 33.5%, as a result of higher wages, raw material costs and depreciation expenses. In addition, gross margin in the fresh vegetables produce segment was also affected by initial start-up costs on new farmland in Jiangxi. Going forward, grp note that the demand for vegetables remains healthy, buoyed by rising urbanization as well as preferences for healthy dietary eating habits and a rising affluence in the PRC market. On the overseas front, the Group continues to benefit from the increasing trend of food manufacturers seeking cost competitive and consistent supply of raw materials for their production.