During the period under view, the company realized sales volume of baby chicks of 130mn (+38.29% yoy), chicken sales volume of 38,000 ton (+38.42% yoy). However, its gross margin decreased by 5.3ppt yoy to 14.52% as average sales price of baby chick suffered year-on-year decline of 8.87%.
It is predicted that its EPS in 2009-2010E to be Rmb0.54 and Rmb0.71 respectively. Based on the latest closing price of Rmb15.76, representing dynamic P/E ratio is at 29x and 22x separately. Considering baby chick’s price fluctuation and its decisive role in the company’s performance, “Neutral” rating is hereby given. Potential risks: 1) Animal diseases like bird flu and 2) Baby chick’s price fluctuation.