China-Biotics, Inc. (CHBT)

[viking86]

Sean Wright's SA Investor Day notes (SA article):

http://seekingalpha.com/instablog/671911-sean-wright/95795-chbt-what-really-happened-at-the-investor-day

My remarks : Since bulk sales will be CHBT's main revenue growth engine in the future, it's important to see what some of their large bulk customers say about them. Here is what Bright Dairy (top 3 dairy producer in China) said about CHBT:

Bright Dairy: Values the product’s stability, safety, and price competitiveness. The price competitiveness is unparalleled. The product’s stability and quality is the same level as Danisco. CHBT is very good in five areas: (i) a professional and fast-reacting team of technicians, (ii) a well-trained sales and marketing staff, (iii) on-time delivery, (iv) low prices, (v) flexible customization based on request. CHBT has a great future and the cooperation between Bright Dairy and CHBT will accelerate.

It's also interesting to see how CHBT's officials valuate their bulk sales potential based on current market pricing.

Dr. Ma Kai: Production and Quality Control. Dr. Kai spoke fluent English. He said at 150 tons Phase I will be the largest probiotics facility in China and should produce 750m RMB of revenue. That translates into 112mm USD for 150mt bulk which will be reached at Qingpu Phase 1 by End of 2011, or an ASP of $745/kg.

CEO: We want to grow very fast but we must pace ourselves. In 1-2 years we will be producing 300 tons per annum.

Using the above ASP of $745/kg, the CEO's prediction of 300 mt/y in 1-2 years translates into 224mm USD of bulk sales (only from Qingpu). For comparison, JNevader used ASP=600 and 750/kg for Phase 1 and Phase 2 (Qingpu) bulk pricing in his most recent model and projected 188mm bulk sales for Qingpu at 300mt annual production for FY2013. This doesnt however include any sales from Pudong plant (12mt), retail sales and bulk sales from the Yangling plant, latter was projected by Nevader to be 155mm USD in FY '13. This is just to show that Nevader's projections are about 16% low compared to Mgnmt's view of bulk sales pricing for Qingpu products. So there's plenty of upside here for Nevaders' "optimistic" projection if things fare out the way the Company has planned it.

http://seekingalpha.com/instablog/691175-jason-nevader/93680-china-biotics-the-next-billion-dollar-food-ingredients-company