CHINA KANGDA, a food processing company, was featured on the TV programme, Money Mind, on Sunday (June 1).
The show began by highlighting soaring food prices around the world. In China, food prices rose a whopping 21% in Q1 this year alone.
Pork prices in China have shot up 60% in the past year. The good news for China Kangda is that consumers are switching to a cheaper alternative – chicken meat.
Chicken meat prices have gone up only about 10% in the last year.
As a result, China Kangda’s sales of chicken meat jumped 150% in Q1 this year to RMB 94.9 million. That accounted for 45% of the company’s total revenue in Q1.
As it screened footage of China Kangda's chicken and rabbit farms - and slaughter houses and production facilities - Money Mind reported that sales of its rabbit meat were also robust.
Sales jumped 70% in Q1 to RMB 35.3 million, mainly to the European Union.
“In terms of PRC export to the EU, China Kangda has over 50% market share. Gross margins are attractive at above 25% usually,” said Gao Yanxu, CEO of the company.
”In the past, China’s export to EU was 30,000 tonnes. Now, it’s far short of 30,000 because of stringent requirements by the EU. This is vast untapped market. In addition, the domestic market is growing at 20% a year.”
|Net profit (RMB ‘000)||15,823||30,048||79,877||86,791||109,852||30,055 (+56.3%)|
According to Money Mind programme, analysts say the near to mid-term outlook for Kangda appears bright.
“China Kangda is an Olympic play because it is sponsoring one of the events. I think we should keep a lookout for this company because I think it is undervalued,” said Gabriel Gan, senior VP, equity sales & dealing, AmFraser Securities.
”Compared to industry peers listed on SGX like People’s Food and Synear Holdings, I think the valuation for China Kangda is pretty low. It is trading at 5.6 X historical PE.”
The day after the TV programme was aired, China Kangda stock closed 1.5 cents higher at 34 cents with 1.97 million shares changing hands. The stock is still trading below its IPO price of 46 cents in 2006.
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