Established in 1997, Celestial NutriFoods Limited is a leading manufacturer of soy protein-based food & beverage products.  The company is invited to co-develop the first phase of the Hi-Tech Soybean Zone project initiated by the Daqing Government in 2004.  Phase 1 of the development has since been complete and operations commenced in June 2006.  It has boosted Celestial capacity and enables the Group to introduce three new products, namely soy functional protein, biochemical feedstuff and lecithin.  The group is also exploring the production of bio-diesel fuel using soybean oil, a by-product of the manufacturing process.
The company net profit margin is approximately 25% with ROE of around 25%.  For the past 5 years, company has achieved a blistering CAGR of 50% on both revenue and net profit.  This is largely attributed to the completion of Soybean Zone project last year.   The growth is expected to continue for 2007 but the earning will be dragged down by non-cash convertible bond interest expense.  The company has a gearing of 87.5%.  The chairman and CEO Ming Dequan holds approximately 28% of the total shares.
I made a mistake on this company in Dec 2004 by selling it off when the market did not react positively to its expansion plan.  Purchasing it at $1.41 in May is not exactly cheap but with its track record over the last 3 years, I am more confident of the management in delivering further growth of the company with careful handling of the company’s debt.
20071H Results
The company has reported a good set of results in Aug with sales growing at 72.1% and net core earning at 38.5%.  Net earning decreases by 3.3% due to non-cash component of interest expenses on convertible bonds.  The company expansion plan is on track and is expected to reach its target of 70% utilization rate of facility.