A promising China stock
China-Biotics (CHBT) is the largest provider of probiotic bacteria in China.
Written by Douglas Estadt
Probiotics are beneficial, live bacteria used as dietary supplements and food additives to improve intestinal health and digestion. Our friend, Dr. Eric Jackson, of Ironfire Capital LLC, joins us today to share some facts about CHBT which he learned during his China trip and meetings with management. Eric also explains why the expansion opportunity is so vast.
- By 2014, probiotics market in China is expected to reach $9 billion (CHBT is #1 producer).
- Top-line revenues have a CAGR of 35% for the last three years.
- Gross margins of 71% for the last two years.
- Retail business can definitely grow from only 100 stores today, however CHBT’s biggest opportunities are in dairy and animal feed.
- All revenue based on old facility with a production capability of 12 MT, while they opened a new facility in February and is expected to be up to 75 MT production capability by this fall and 225 MT by 2011.
- China is a net importer because they cannot presently produce enough probiotics domestically.
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The stock is expensive and the guidance is weak -- not an appetizing combination.
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