• Established in 1997
• Started as an exporter of canned products
• Key loquat juice player in China
We recently visited China and Hong Kong to learn more about Sino Grandness Food Industry Group Limited (SFGI). The trip included a visit to the company’s latest factory in Hubei, a trade exhibition held in Nanjing, as well as selected retail outlets in Hong Kong that sell their juice products. The company is a Shenzhen-based producer of fruit juices such as loquat juice under its brand “Garden Fresh” as well as canned products, with an estimated total of 27 SKUs. The Group’s products are distributed across Europe, North America and in Asia, with canned products exported to major supermarkets in Europe like Lidl. As of FY14, the geographical sales breakdown was as follows: China (77.5%), Europe (20.3%), North America (1.6%), others (0.8%). More recently, the group has expanded into Hong Kong, and there are plans to export to Thailand as well.
Investing in marketing initiatives
SFGI’s marketing strategy includes outdoor advertising and promotional activities, as well as TV advertising and sponsorship of TV programmes. Every year, the group also participates in two trade shows in Chengdu in March and Nanjing in October, which are important for garnering interest and gaining orders from existing and new customers.
Trading at 2.7x T12M P/E
In its latest 1H15 results, revenue grew 17.2% YoY to RMB1.5b and PATMI was up 85.5% to RMB234.3m. Both its beverage segment and domestic canned products segment saw increased revenue on the back of good orders. Overall gross profit margin (GPM) had improved 2.8ppt to 41.5% due to more own-branded products that enjoy higher margins, as well as reducing reliance on outsourcing. All considered, one of the eventual catalysts for SFGI would still be a positive outcome for the proposed spin-off of its beverage business in Hong Kong. SFGI is currently trading at 2.7x T12M P/E, which is about 1 s.d. below its two-year historical average P/E, according to Bloomberg. We do not have a rating on this stock. (Read Report)
Source : OCBC Investment Research