Fufeng Group equities research by China Merchants Securities 

(MENAFN - ABN Newswire)

Fufeng Group (HKG:0546) is the largest MSG producer in China. The company MSG products accounting for 25% of Chinese market share and 20% of world market share. The company's customers mainly are food processing enterprises, catering enterprises and the company will expand its sells channel to the end customers in the future. We forecast that net profit can grow by a CAGR of 26% from 2010-2012. Our TP is HK9.7, based on 13X10PE. We initiate the company stock with a buy rating.

The largest MSG producer in China Established in 1999, the company is the largest MSG producer after 10 year's development. Currently, the company is accounting for 25% of the China's MSG market share and 20% of the global MSG market share. The company targeted a 40% market share of China's MSG market in the future.

Cost leader in MSG industry The Company's production base is in proximity to the raw materials production areas, thus it enjoys a higher GM and net profit margin comparing with industry average. The new production base in Northeast China will continue to decrease the company raw material cost Key to expand in consumer sells channel The Company is key to expand its consumer sells channel. Currently, Company sales are mainly coming from food processing business, catering business and supermarkets.

We believe the company is benefitting from the double digit growth of catering and food processing enterprises.

Valuation and rating We forecast that the MSG price RMB9000/ton in 2010 and volume growth coming from the new capacities added in 2009. We forecast that 2010-2012 EPS is RMB0.66,0.87 and 1.04 . Our TP is HKD9.7, based on 13X10PE. We initiate the company stock with a buy rating.