Yongye Sees Rising China Organic Fertilizer Demand, CFO Says
Yongye International Inc., a Chinese seller of plant nutrients, is benefiting from government efforts to encourage the use of organic fertilizer to improve both crop yields and farmers’ incomes.
“There is pressure to boost yields as the population is still rising and demand for better food will increase as arable land is being encroached upon by developers,” Sam Yu, chief financial officer, said in a phone interview from Beijing, where the company is based. “We also benefit from government support to agricultural producers.”
Yongye’s New York-listed shares have more than doubled over the past year, as China’s rising incomes and increasing demand for grains and meat spurred growth of its plant and animal nutrient business. The company’s stores may rise to 20,000 by the end of this year after climbing to 13,000 from 1,100 early last year, said Yu. The shares gained 1.9 percent to $7.49 in Nasdaq stock market trading on May 28.
Yongye’s first-quarter revenue doubled to $24.9 million while net income jumped 32 percent to $4.4 million. The company expects revenue to rise to as much as $165 million this year and non-GAAP net income to climb to as much as $45 million. It forecasts revenue to grow at 50 percent annually until 2012.
“The company has very aggressive expansion plans and plans to triple manufacturing capacity this year,” said Katherine Lu, a New York-based director of China equities at Oppenheimer & Co., who has an “outperform” rating on the stock. “Because of China’s diminishing arable land and excessive pesticide use, the government wants to promote organic fertilizer usage. It wants to see usage rise to 30 percent of total fertilizer from probably the mid-teens to 20 percent now.”
Boosting Yields
Demand for corn and soybeans in China, the world’s biggest consumer of grain and meat, will climb as an expanding economy boosts incomes and alters diets, Robert Day, general manager of south China operations at Cargill Inc., the largest U.S. agricultural company, said May 20.
“The macro situation is very favorable for us,” Yu said, estimating that Yongye’s Shengmingsu-brand plant nutrients can improve crop yields for arable land by 15 percent to 30 percent.
Yongye is rated the equivalent of “buy” by all five analysts who cover the stock, according to data compiled by Bloomberg. The shares have gained 162 percent over the past year, compared with a 116 percent advance for Origin Agritech Ltd., which sells genetically modified corn seeds, and a 27 percent gain for the Nasdaq. Yongye trades at 7.7 times estimated earnings, compared with 26.5 times for Origin Agritech, according to Bloomberg data.
“Valuations are attractive,” Oppenheimer’s Lu said. “Its products have higher margins and the purchase of a lignite coal mine will help it source raw material for its nutrients business.”
Copyright: arcticle: Bloomberg Business Week
Original article from: http://www.businessweek.com/news/2010-05-31/yongye-sees-rising-china-organic-fertilizer-demand-cfo-says.html
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Yongye International Inc., a Chinese seller of plant nutrients, is benefiting from government efforts to encourage the use of organic fertilizer to improve both crop yields and farmers’ incomes.
“There is pressure to boost yields as the population is still rising and demand for better food will increase as arable land is being encroached upon by developers,” Sam Yu, chief financial officer, said in a phone interview from Beijing, where the company is based. “We also benefit from government support to agricultural producers.”
Yongye’s New York-listed shares have more than doubled over the past year, as China’s rising incomes and increasing demand for grains and meat spurred growth of its plant and animal nutrient business. The company’s stores may rise to 20,000 by the end of this year after climbing to 13,000 from 1,100 early last year, said Yu. The shares gained 1.9 percent to $7.49 in Nasdaq stock market trading on May 28.
Yongye’s first-quarter revenue doubled to $24.9 million while net income jumped 32 percent to $4.4 million. The company expects revenue to rise to as much as $165 million this year and non-GAAP net income to climb to as much as $45 million. It forecasts revenue to grow at 50 percent annually until 2012.
“The company has very aggressive expansion plans and plans to triple manufacturing capacity this year,” said Katherine Lu, a New York-based director of China equities at Oppenheimer & Co., who has an “outperform” rating on the stock. “Because of China’s diminishing arable land and excessive pesticide use, the government wants to promote organic fertilizer usage. It wants to see usage rise to 30 percent of total fertilizer from probably the mid-teens to 20 percent now.”
Boosting Yields
Demand for corn and soybeans in China, the world’s biggest consumer of grain and meat, will climb as an expanding economy boosts incomes and alters diets, Robert Day, general manager of south China operations at Cargill Inc., the largest U.S. agricultural company, said May 20.
“The macro situation is very favorable for us,” Yu said, estimating that Yongye’s Shengmingsu-brand plant nutrients can improve crop yields for arable land by 15 percent to 30 percent.
Yongye is rated the equivalent of “buy” by all five analysts who cover the stock, according to data compiled by Bloomberg. The shares have gained 162 percent over the past year, compared with a 116 percent advance for Origin Agritech Ltd., which sells genetically modified corn seeds, and a 27 percent gain for the Nasdaq. Yongye trades at 7.7 times estimated earnings, compared with 26.5 times for Origin Agritech, according to Bloomberg data.
“Valuations are attractive,” Oppenheimer’s Lu said. “Its products have higher margins and the purchase of a lignite coal mine will help it source raw material for its nutrients business.”
Copyright: arcticle: Bloomberg Business Week
Original article from: http://www.businessweek.com/news/2010-05-31/yongye-sees-rising-china-organic-fertilizer-demand-cfo-says.html
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