China Agri (606.HK) TP:HKD 7

China Agri-Industries target price raised to 7 hkd - Goldman Sachs2008-4-17 04:10:00 p.m. HKT, XFNA

Goldman Sachs has raised its target price on China Agri-Industries Holding Ltd (606.HK) to 7 hkd from 6.7 while maintaining its "buy" call on the mainland-based agricultural products producer, citing higher earnings forecasts. Goldman raised its 2008 and 2009 earnings per share (EPS) estimates for the company by 20 pct and 16 pct, respectively, to 1.76 bln and 1.92 bln hkd, factoring in the expected recovery of unrealized losses and capacity expansion. Goldman noted that China Agri-Industries remained positive about its 2008 earnings as it has hedged the costs of its oilseed processing business. It also adopted a flexible subsidy mechanism to reduce margin volatility on its biofuel business, the brokerage said. Moreover, its new biofuel and biochem plants should contribute more to its earnings from 2008 while capacity expansion being extended to other divisions as well, Goldman said. China Agri-Industries reported yesterday that its 2007 net profit rose 46 pct year-on-year to 1.1 bln hkd, 7 pct below Goldman's estimate. However, the net profit included an unrealized loss of 381 mln hkd from hedging activities in its oilseed processing business. The company said it expects to fully recover the unrealized loss in the first half of this year. At 3.50 pm, shares of China Agri-Industries were trading up 0.15 hkd or 2.87 pct at 5.38.