Want Want China 151.HK Part 2

Financial Analysis

A company with good products is not good enough if earning is poor. Want Want’s turnover, profit and earning per share growth have increase year on year over the past two years. It is important for the turnover to increase because it indicates the company is selling more goods and not artificially inflating the earnings through other mean. A further look at the IPO prospectus confirms that finance income constitutes less than 5% of the gross profit. This is very important in the current market sentiment because we don’t want future profit to decrease due to the stock market. This is something we cannot say for the insurance industry since a lot of their income come from investment profit.

Key Ratios

To looki at a company’s ratio and compare it with the industry sector tell us whether the company’s state of health.

PE Ratio

Want Want have the lowest PE ratio in the industry. Assume everything else is equal Want Want share price has potential to double to reach 197.HK’s PE of 8.2 or to ten fold to reach 322.HK’s PE of 49 . U-President China 220.HK has a par value of US0.01 vs. Want Want US0.02. U-President China is trading at $HK4.00 when Want Want is only trading at $3.00. The share price is cheap.

Equity

Want Want have equity of $HK5,845M. We can confirm that the company is not small and hence has a market position.

Financial Ratios

Want Want EPS is comparable to Tinyi Holdings 322.HK. It has more debt than Tinyi but less than China Foods therefore it is acceptable. Lastly and most importantly its profit margin is much better than the rest of the industry this is extremely good.