Progressing well on all fronts. 3Q13 results were better than expected with revenue up 56% and net profit doubled YoY. 9M13 revenue was in line at 71% of our full-year number but margin surpassed expectation. Accordingly, we raise our FY13 PATMI by 8% to CNY423m, which our FY14-15 forecasts remain largely unchanged. We understand that the listing of Garden Fresh is progressing smoothly and is set to complete by Oct 2014. Maintain BUY with a higher TP of SGD1.00 based on SOTP.

CNY250m FY13’s PATMI target for Garden Fresh within reach. The beverage division “Garden Fresh” achieved revenue of CNY746m (+79% YoY) in 3Q13. We estimate it recorded 9M13 PATMI of CNY190-200m, putting it on track to achieve management’s full-year target of CNY250m. The good performance was helped by the expansion of sales network into new areas such as central, northwest and northeast China as well as the penetration into new channels such as chain restaurants. Garden Fresh now has a more diversified distribution network, with large supermarkets contributing 25% of total sales from 50% a year ago.

Other parts of business also did well. Its other business divisions also did well in 3Q13: a) the revenue generated by domestic canned products (8.2% of total revenue) jumped 94% YoY; and b) the export vegetable revenue (33.2% of total) surprisingly increased 23% due to re-stocking by some European customers.

Receivable days remain manageable. The account receivables rose 31% QoQ and by 77% YTD to CNY983; in tandem with a 25% QoQ and 84% YTD revenue growth. Receivable days of 106 days (our own calculation) for 3Q13 are within the historical range (Figure 2). This usually improves in the fourth quarter based on historical trend.

Garden Fresh IPO still on track. Our key investment thesis is built on the benefits arising from the listing of Garden Fresh. This should pave the way for its beverage subsidiary to grow at a faster pace. According to our understanding, the investment banks and auditors have been confirmed, and the official IPO applications to HK Stock Exchange would be submitted by June 2014.  

Source: Maybank Kim Eng Research - 15 Nov 2013