China-Biotics, Inc. (CHBT)

[tootalljones]

BIDU’s valuation
Analysts have forecasted that BIDU’s EPS will be $0.97, $1.44 and $2.27 in 2009-2011, respectively. This represents around 50% annual growth. At $109 a share, BIDU’s P/E ratio is 76 times for the 2010 fiscal year and the PEG is 1.51.
China-Biotics, Inc. (CHBT) is engaged in the research, development, production, marketing, and distribution of probiotics products, which are products that contain live microbial food supplements. The Company manufactures and sells several health supplements under the Shining brand in China.
All of these products have been approved by the Ministry of Health in China. In February 2010, China-Biotics, Inc. commenced production at its facility in Qingpu and began producing bulk additives products, which are sold to institutional customers, such as dairy manufacturers, animal feed manufacturers, pharmaceutical companies, and food companies.

There are non-cash items from changes in fair value of derivatives that have to be excluded to see the real net income. I’ve adjusted them in the table below.

Up until now, Chinese dairy manufacturers imported probiotics mostly from Europe and Japan. CHBT entered into the bulk additives probiotics industry over a year ago and just started production at its new plant in Qingpu. It is now the biggest domestic player in China.
The quality of its products is equal to or better than that of its foreign competitors while prices are 20-30% lower. Entry into the industry is very difficult because the standard of food production is so high; it requires high technology; and it is hard to get licenses from the government. CHBT’s being a cost leader also gives it an advantage in terms of competitiveness.