Company Name: CHINA MINZHONG FOOD CORP LTD
| Research House: DBS Vickers | Price Call: HOLD | Target Price: 0.60 |
DBS Vickers downgraded vegetable processing firm China Minzhong Food Corp to ’hold’ from ’buy’ and cut its target price to $0.60 from $1.45, citing cost challenges, lower margins outlook and muted growth prospects.
By 10:15 a.m., China Minzhong shares were 1.6% lower at $0.60 and have fallen about 26% so far this year, compard to the FT ST China Index’s 2.4% rise.
“The slower-than-expected flushing out of crops due to the winter delay in FY12 and persistently higher costs are likely to depress margins going forward,” said DBS in a report.
It also noted that China Minzhong is now more focused on expanding industrial farmland instead of agricultural farmland, which means slower earnings growth as margins for processing vegetables are much lower than for cultivating vegetables, said DBS.
The brokerage said it expects China Minzhong’s gross margins to decline to 35.3% in 2014 from 38% this year.
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