Fufeng Group (HKG:0546) Upgraded To Buy by Piper Jaffray Asia Securities Limited
Hong Kong, Aug 15, 2009 AEST (ABN Newswire) - Piper Jaffray Asia Securities Limited upgraded Fufeng Group Limited (US:FFNGY)(HKG:0546) to BUY rating after meeting with its management. Projected the new target price is HK$3.70 based on 8x FY09E P/E and volatility is high. They increased their FY09 and FY10 earning estimation by 74% and 86% to Fufeng as the lower production cost in the new Inner Mongolian plant. And operating margin in FY09 will be increased to 17.5% and higher MSG output in FY10E.
For MSG oversupply risk, due to high corn and energy costs crowd out the small and inefficient competitors from re-entering the market in 2H09 and government environmental protection policy, the risk is reduced as the price brought to Rmb 6850/tonne level during 1H09 (9% YoY).
Gross margins look sustainable which supported by the government agricultural policy and the xanthan gum's average selling price in FY09E/10E will have 13%/3% YoY cut in order to get the market share. Contributed from the lower production cost, the gross margin would remain at 38% for 2HFY09E/10E.
For the Piper Jaffray Asia Securities Limited Research article, please see the following link:
Link: http://www.abnnewswire.net/media/en/docs/61266-PJ-July-09.pdf
About Fufeng Group Limited
Fufeng Group (
HKG:0546) is the world's largest producer of MSG, xanthan gum and a major supplier for a series of bio-fermentation products. The main products of the Group are food additives, animal nutrition, colloid and high-end amino acids. In fiscal 2016, Fufeng generated sales of approximately RMB11.2 billion and profit attributable to shareholders of about RMB1.09 billion. For more information, please visit our website www.fufeng-group.com
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