Press Releases

Hong Kong, Aug 20, 2010 (ABN Newswire) - Fufeng Group Limited (HKG:0546) (PINK:FFNGY) announced 2010 interim results. Sales up 45.4% yoy to RMB2.98Bn, profit attributable to equity holders up 30% yoy to RMB460Mn. EPS reached RMB0.32. The company proposed an interim-dividend of RMB0.11 per share. The Xanthan Gum segment reached 20% of total gross profit in 1H2010 and another high margin-product Threonine will become new growth driver in the future. We maintain our EPS estimate from 2010-2012 as RMB0.66, 0.88 and 1.11 respectively. We slightly revised up our TP to HK$10, based on 10X11PE and we reiterate buy rating of the stock.

Xanthan Gum accounted for 20% of the total gross profit

In 1H2010, the Xanthan Gum sales volume increased by 128% to 19086 tons, while the ASP is decreasing 8.5% yoy due to the company's strategy of market share expansion. The company targets 60% of global market share in the future.

Glutamic acid was internally used

The company's Glutamic acid sales only accounted for 3.2% of the total sales in 1H2010, as most of the glutamic acid was used internally in 1H2010. The company promotes Uo brand in 2009 and the products currently were sold in 2000 supermarkets.

Threonine will become new growth driver in the future

The company established 5000 tons of threonine product capacity in 1H2010, with the capacity to reach 10000 tons at the end of 2010. we believe the high margin product (GM reaches 30%) will become new growth driver in the future.

Valuation and rating

We maintain our EPS estimate from 2010-2012 as RMB0.66, 0.88 and 1.11 respectively. We slightly revised up our TP to HK$10, based on 10X11PE and we reiterate buy rating of the stock.

Financials
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RMB mn       2008    2009  2010E  2011E   2012E
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Revenue      3585    4633   6982   9168   11062
Growth (%)    47%     29%    51%    31%     21%
Net income    295     928   1099   1459    1851
Growth (%)   554%    215%  18.4%    33%     27%
EPS(yuan)    0.18    0.56   0.66   0.88    1.11
P/E(X)       27.0     8.6    7.2    5.5     4.3
ROE(%)        17%     39%    34%    33%     31%
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Source: Company data, CMS (HK) estimates

For the complete China Merchants Securities (SHA:600999) Fufeng Research Report, please refer to the following Link below:
http://www.abnnewswire.net/media/en/docs/63560-CMS-1008-100819.pdf

Contact

Carine Wong Investor Relations Fufeng Group Limited Tel: +852-3185-0300 Email: carinewong@fufeng-group.com.hk www.fufeng-group.com