This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Asia Pacific Equity Research 14 May 2012

China Minzhong Food Corporation Limited Facing up to slower growth scenarios from FY13E downgrade to UW  Weaker earnings for the quarter: Cost pressures continued to magnify. China Minzhong reported 3QFY12 net profit of Rmb241 million (-8% Y/Y) – missing JPM/consensus by c.14%/20%. The miss was once again attributed to the late winter arrival, which resulted in sales of champignon mushrooms rolling over into the April/May period (4QFY12) as well as rising costs hurting margins at the gross, operating and PBT levels.  Higher costs pressure margin: GP margin compressed across the board with Processed dropping from 37.2% to 33.2% and Fresh dropping from 71.3% to 58.5% due to kick-in of depreciation expenses for New Industrial Park and rising labor & raw materials costs respectively during the quarter. Below the GP level, SG&A grew a combined 27%/54% for 3Q/9MFY12.  Higher interest costs also hurt profitability: Financial expenses also rose by >10-fold for 9MFY12 due to increase in funding for working capital needs. Cash conversion cycle increased from 62 to 66 days for 9MFY12.  A case for lower to no growth in FY13E/FY14E – can higher ASP/margin products save the day? For 9MFY12, revenue contribution by “higher ASP/margin” Black fungus and King oyster mushrooms increased to 18.7% from 11.6% translating to c.80% Y/Y increase. However, based on our analysis, given the limited capacity expansion for both products from current levels, we estimate that the incremental gross profit from the 2 products will only barely offset the current higher SG&A and financial cost base, assuming no further cost increases. The company will then need new farmland expansion to drive incremental earnings growth but that is not in the plan.  Downgrade to UW, Jun-2013 PT of S$0.70: The stock has been a consensus Buy, with the exception of JPM’s Neutral rating. We believe this result would likely trigger a greater magnitude of consensus earnings/PT downgrades given the persistent cost pressure and the weaker growth outlook. We trim our earnings estimates for FY13/FY14 by a further 21%/31% reducing PT to S$0.70 (from Dec-12 PT of S$0.95). China Minzhong Food Corporation Limited (Reuters: CMFC.SI, Bloomberg: MINZ SP) Rmb in mn, year-end Jun FY10A FY11A FY12E FY13E FY14E Revenue (Rmb mn) 1,423 1,929 2,586 2,773 3,173 Net Profit (Rmb mn) 367.5 566.7 703.6 662.5 706.9 Net Profit (Recurring) (Rmb 383 566 704 662 707 mn) EPS (Rmb) 0.67 1.02 1.26 1.19 1.27 EPS (Recurring) (Rmb) 0.70 1.01 1.26 1.19 1.27 DPS (Rmb) 0.00 0.00 0.00 0.00 0.00 Revenue growth (%) 34.5% 35.6% 34.1% 7.2% 14.4% EPS growth (%) 27.6% 51.9% 24.2% -5.9% 6.7% EPS (Recurring) Growth 37.1% 45.6% 24.4% (5.8%) 6.7% ROE 22.4% 21.8% 21.6% 16.8% 15.3% P/E (x) 5.6 3.7 3.0 3.2 3.0 P/BV (x) 0.9 0.7 0.6 0.5 0.4 Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%

▼ Underweight Previous: Neutral CMFC.SI, MINZ SP Price: S$0.75

▼ Price Target: S$0.70 Previous: S$0.95

Singapore Food & Food Manufacture Ying-Jian Chan, CFA

AC

(65) 6882-2378 [email protected] J.P. Morgan Securities Singapore Private Limited

Ebru Sener Kurumlu (852) 2800-8521 [email protected] J.P. Morgan Securities (Asia Pacific) Limited Price Performance 1.8 S$

1.4 1.0 0.6 May-11

Aug-11

Nov-11

Feb-12

May-12

CMFC.SI share price (S$) FTSTI (rebased)

Abs Rel

YTD 1.2% -7.8%

1m -17.1% -15.0%

Company Data 52-week Range (S$) Mkt Cap (S$ mn) Mkt Cap ($ bn) Price (S$) Date Of Price Free float (%) 3-mth trading volume 3-mth trading value (S$ mn) 3-mth trading value ($ mn) FTSTI Exchange Rate Fiscal Year End

3m -17.9% -14.8%

12m -53.7% -44.5%

1.67 - 0.67 415.29 0.33 0.75 14 May 12 67.3% 6.82 6.75 5.39 2,883 1.25 Jun

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 10 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.morganmarkets.com

This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Asia Pacific Equity Research 14 May 2012

Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Company Description

P&L sensitivity metrics

China Minzhong is an integrated vegetable processor in China. Its operations are strategically located across various provinces. As part of its integrated operations, it possesses cultivation capabilities which allow the company to manage the supply of fresh vegetables and supply raw material for the processing operation.

Processed vegetables GP margin assumption Impact of each 1 ppt increase

EBITDA impact (%) FY13E: 2.0

Fresh produce revenue per mu assumption Impact of each 5% increase

FY13E:

Fresh produce (blended) GP margin assumption Impact of each 1 ppt increase

FY12E:

EPS impact (%) 31.0% 2.4

1.9

14,832 2.5

1.0

48.2% 1.4

Source: J.P. Morgan estimates.

Price target and valuation analysis Our PT of S$0.70 is based on 3x forward P/E, on par with key sector peers. Revenue breakdown (FY13E)

36%

FY13E EPS (RMB) Target P/E Fair value (RMB) Fair value (S$) Price target (S$)

64%

Processed products

1.19 3.0 3.57 0.71 0.70

Fresh produce

Our Jun-2013 PT implies 3x CY2012E/CY2013E P/E. Key upside risks to our price target include: (1) change to a Big 4 auditor; (2) higher vegetables prices increasing revenue, (3) acceleration in ramp-up of newly planted farmland.

Source: Company reports

Net income: J.P. Morgan vs consensus RMB MM J. P. Morgan Consensus FY12E 704 686 FY13E 662 866 FY14E 707 992 Source: J.P. Morgan estimates, Bloomberg.

Peer group valuation comparison Company Chaoda Modern Agriculture China Green (Holdings) Ltd China Minzhong Food Yamada Green Resources Le Gaga Holdings Ltd Sector average

Ticker 682 HK 904 HK MINZ SP YGR SP GAGA US

Last Price (LC) Susp 1.73 0.75 0.19 4.98

Market Cap (US$ mil) 466 197 331 61 228

Source: J.P. Morgan estimates, Company data, Bloomberg. Prices as at 14 May 2012.

2

P/E (x) 2012E 2013E NA 2.6 3.1 2.3 4.7 3.2

NA 2.1 3.1 2.1 3.6 2.7

P/B (x) 2012E 2013E NA 0.3 0.5 NA 0.1 0.3

NA 0.3 0.5 NA 0.1 0.3

EPS Growth 2012E 2013E NA 5.3% 7.5% 48.1% 57.0% 29%

NA 21.9% 0.2% 12.5% 30.7% 16%

Div Yield 2012E 2013E NA 10.4 0.0 10.7 0.0 5.3

NA 10.7 0.0 10.7 0.0 5.4

ROE 2012E NA 11.7 17.5 33.2 14.9 19.3

This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Asia Pacific Equity Research 14 May 2012

Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Weaker earnings for the quarter Cost pressures, which we had highlighted as early as February, continued to magnify. China Minzhong reported 3QFY12 net profit of Rmb241 million (-8% Y/Y) – missing JPM/consensus by c.14%/20%. The miss was once again attributed to the late winter arrival, which resulted in sales of champignon mushrooms rolling over into the April/May period (4QFY12) as well as rising costs hurting margins at the gross, operating and PBT levels. Table 1: 3QFY12 results overview Rmb in millions Revenue - Processed - Fresh % Revenue - Processed - Fresh Gross profit - Processed - Fresh % Gross profit - Processed - Fresh GP margin - Processed - Fresh Net profit (reported) Net profit (core)

1QFY11 264.1 111.8 152.3 100% 42% 58% 87.2 34.5 52.7 100% 40% 60% 33.0% 30.9% 34.6%

2QFY11 545.1 431.5 113.6 100% 79% 21% 217.5 144.1 73.4 100% 66% 34% 39.9% 33.4% 64.6%

3QFY11 703.9 501.3 202.6 100% 71% 29% 330.9 186.3 144.6 100% 56% 44% 47.0% 37.2% 71.4%

4QFY11 416.1 286.0 130.1 100% 69% 31% 165.0 92.8 72.2 100% 56% 44% 39.6% 32.5% 55.5%

1QFY12 361.4 154.1 207.3 100% 43% 57% 147.0 58.8 88.2 100% 40% 60% 40.7% 38.2% 42.5%

2QFY12 650.8 446.0 204.8 100% 69% 31% 238.2 151.4 86.7 100% 64% 36% 36.6% 34.0% 42.4%

3QFY12 753.2 513.1 240.1 100% 68% 32% 310.9 170.4 140.5 100% 55% 45% 41.3% 33.2% 58.5%

52.4 52.4

156.3 156.5

261.1 261.1

96.9 95.5

93.1 93.1

174.7 179.1

240.8 240.8

Y/Y

-1.5ppt 1.5ppt -5.7ppt -4.0ppt -12.8ppt

9MFY11 1,513.1 1,044.6 468.5 100% 69% 31% 635.6 364.9 270.7 100% 57% 43% 42.0% 34.9% 57.8%

9MFY12 1,765.3 1,113.2 652.1 100% 63% 37% 696.0 380.6 315.4 100% 55% 45% 39.4% 34.2% 48.4%

-7.8% -7.8%

469.8 470.0

508.6 513.0

7.0% 2.4% 18.5% -3.1ppt 3.1ppt -6.1% -8.5% -2.8%

Y/Y 16.7% 6.6% 39.2% -6.0ppt 6.0ppt 9.5% 4.3% 16.5% -2.7ppt 2.7ppt -2.6ppt -0.7ppt -9.4ppt 8.3% 9.1%

Source: J.P. Morgan, Company data.

Higher costs pressure margin GP margin compressed across the board with Processed dropping from 37.2% to 33.2% and Fresh dropping from 71.3% to 58.5% due to kick-in of depreciation expenses for New Industrial Park and rising labor & raw materials costs respectively during the quarter. Below the GP level, SG&A grew a combined 27%/54% for 3Q/9MFY12. Figure 1: Selling & distribution and administrative expenses trend Rmb in millions

60

120%

112%

50

98% 84%

40

87%

100% 80%

79%

30

60% 43%

20

30%

24%

10

8%

0 1Q10

2Q10

3Q10

4Q10

Selling & distribution

1Q11

2Q11 Admin

3Q11

40% 27% 20% 0%

4Q11

1Q12

2Q12

3Q12

% Y/Y growth in total SG&A

Source: J.P. Morgan, Company data.

3

This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Asia Pacific Equity Research 14 May 2012

Higher interest costs also hurt profitability Financial expenses also rose by >10-fold for 9MFY12 due to increase in funding for working capital needs. Cash conversion cycle increased from 62 to 66 days for 9MFY12. Figure 2: Net financial expense trend Rmb in millions

10

8.6

8 6.3

5.6

6 4.0

4 1.5

2 0.3

0.1

1Q11

2Q11

0 3Q11

4Q11

1Q12

2Q12

3Q12

Source: J.P. Morgan, Company data.

Current short term borrowings stands at Rmb582 million with management guiding a further drawdown of Rmb100-150 million, which would translate to even higher interest expense.

Can higher ASP/margin products save the day? For 9MFY12, revenue contribution by “higher ASP/margin” Black fungus and King oyster mushrooms increased to 18.7% from 11.6% translating to c.80% Y/Y increase. Figure 3: Revenue breakdown by vegetable species

Source: Company reports.

4

This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Asia Pacific Equity Research 14 May 2012

Figure 4: Black fungus and King oyster mushrooms revenue by quarter Rmb in millions

90 80 70 60 50 40 30 20 10 0 1QFY11

2QFY11

3QFY11

4QFY11

Black fungus

1QFY12

2QFY12

3QFY12

King oyster mushroom

Source: J.P. Morgan, Company data.

However, this has not helped alleviate margin pressure and we do not believe margin expansion from higher ASP/margin products will help significantly going forward. Our analysis as to why is as follows: Table 2: Analysis of incremental revenue and gross profit Black fungus 3QFY12 revenue (Rmb in millions) 3QFY12 production volume (tons/day) Expected capacity (tons/day) Assuming same ASP, GP margin of 60%, Incremental revenue (Rmb in millions) Incremental gross profit per quarter (Rmb in millions)

King oyster mushroom

Total

85 19 25

30 18 24

26.8

9.9

36.7

16.1

5.9

22.0

Source: J.P. Morgan estimates.

Table 3: Analysis of whether higher ASP/margin products may offset higher costs Rmb in millions Incremental gross profit per quarter Annualized incremental gross profit 9MFY12 increase in SG&A and financial expenses Annualized incremental in SG&A and financial expenses Net surplus / (deficit)

22.0 88.0 64.1 85.5 2.6

Source: J.P. Morgan estimates.

Based on our analysis above, only if — (1) all the capacity expansion for Black fungus and King oyster mushrooms are ramped up as planned and contribute fully to FY13E earnings, and (2) there is no further increase in operating/finance costs — then only will China Minzhong barely be able to offset the current higher cost base that it is at. There has also not been any new planting since Jun-2011 and management does not expect significant expansion going forward. Without new farmland expansion, the higher ASP/margin products ramp up will only barely be sufficient to offset the bulk of the higher costs, but it will be unlikely for us to expect any significant earnings growth from the company going forward.

5

This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Asia Pacific Equity Research 14 May 2012

Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Changes to earnings estimates Table 4: Summary of changes to earnings estimates Rmb in millions, unless otherwise stated FY12E Processed products Volume (ton) ASP (Rmb/ton)

Revenue Processed products Fresh produce Gross profit Processed products Fresh produce Selling & distribution expenses Administrative expenses Financial expense, net Net profit

FY14E

FY12E

New FY13E

FY14E

FY12E

% change FY13E

FY14E

FY12E

% Y/Y growth FY13E FY14E

45,430 35,568

49,973 42,682

54,970 46,950

45,430 35,568

45,430 39,125

49,973 43,037

0.0% 0.0%

-9.1% -8.3%

-9.1% -8.3%

-30.0% 90.0%

0.0% 10.0%

10.0% 10.0%

NA

NA

NA

14,400

14,832

15,277

NA

NA

NA

3.0%

3.0%

3.0%

NA

NA

NA

59,437

59,437

59,437

NA

NA

NA

36.0%

0.0%

0.0%

33.0% 50.0%

33.0% 52.0%

33.0% 52.0%

33.0% 50.3%

31.0% 48.2%

30.0% 46.1%

0.0ppt 0.3ppt

-2.0ppt -3.8ppt

-3.0ppt -5.9ppt

-1.4ppt -7.0ppt

-2.0ppt -2.1ppt

-1.0ppt -2.1ppt

2,384 1,616 769 917 533 384

3,092 2,133 959 1,203 704 499

3,778 2,581 1,197 1,474 852 622

2,586 1,616 970 1,021 533 488

2,773 1,777 996 1,031 551 480

3,173 2,151 1,022 1,116 645 471

8.5% 0.0% 26.3% 11.3% 0.0% 27.0%

-10.3% -16.7% 3.8% -14.3% -21.7% -3.8%

-16.0% -16.7% -14.6% -24.3% -24.2% -24.3%

34.1% 21.4% 62.1% 27.6% 16.5% 42.3%

7.2% 10.0% 2.6% 1.0% 3.3% -1.6%

14.4% 21.0% 2.7% 8.3% 17.1% -1.8%

(83)

(108)

(132)

(91)

(111)

(127)

8.5%

2.5%

-4.0%

61.2%

22.6%

14.4%

(107) (26) 640

(139) (37) 835

(170) (37) 1,030

(116) (32) 704

(139) (45) 662

(159) (45) 707

8.5% 25.0% 10.0%

-0.3% 21.7% -20.7%

-6.7% 21.7% -31.4%

44.7% 450.3% 24.1%

19.2% 39.5% -5.8%

14.4% 0.0% 6.7%

Fresh vegetables Yield per mu (Rmb) Average planted area (mu) GP margin Processed products Fresh produce

Old FY13E

Source: J.P. Morgan estimates.

Figure 5: 12-month forward P/E (x)

9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0

+2SD: 7.8x +1SD: 6.6x Mean: 5.4x -1SD: 4.2x

Source: J.P. Morgan estimates, Company data, Bloomberg.

6

-2 S.D.

+1 S.D.

+2 S.D.

Apr-12

May-12

Mar-12

Mar-12

Feb-12

Jan-12

Jan-12

Dec-11

Nov-11

Oct-11

Nov-11

Sep-11

Sep-11

Jul-11

-1 S.D.

Aug-11

Jun-11

Jun-11

May-11

Apr-11

Apr-11

Mar-11

Feb-11

Jan-11

Mean

Feb-11

Dec-10

Dec-10

Oct-10

12M Fwd P/E

Nov-10

Sep-10

Sep-10

Aug-10

Jul-10

Jul-10

Jun-10

May-10

Apr-10

May-10

-2SD: 2.9x

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Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Figure 6: Price index of a basket of 18 vegetables Rebased to 1

2.5 2.0 1.5 1.0

Apr-12

Jan-…

Oct-11

Jul-11

Apr-11

Jan-…

Oct-10

Jul-10

Jan-…

Apr-10

Jul-09

Oct-09

Jan-…

Apr-09

Jul-08

Oct-08

Jan-…

Apr-08

Oct-07

Jul-07

Apr-07

Jan-…

Oct-06

Jul-06

Apr-06

Jan-…

Oct-05

Jul-05

Apr-05

Jan-…

Oct-04

Jul-04

Jan-…

0.0

Apr-04

0.5

Source: J.P. Morgan, CEIC.

7

This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Asia Pacific Equity Research 14 May 2012

Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

JPM Q-Profile China Minzhong Food Corp. Ltd. (CHINA / Consumer Staples) As Of: 11-May-2012

[email protected]

Local Share Price

Current:

0.83

12 Mth Forward EPS

2.00

1.80

1.80

1.60

1.60

Current:

1.53

1.40

1.40

1.20

1.20 1.00

1.00

0.80

0.80

0.60

0.60

0.40

0.40

0.20

0.20

Earnings Yield (& local bond Yield) 40%

12Mth fwd EY

37%

Implied Value Of Growth*

Current:

Apr/11

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

Aug/99

Jun/98

Apr/97

0.00 Nov/97

Apr/11

Current:

China BY

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

Aug/99

Jun/98

Apr/97

Nov/97

0.00

-333.59%

1.00

Proxy

0.50

35%

0.00

30%

-0.50

25%

-1.00

20%

-1.50

15%

-2.00

10%

-2.50 -3.00

5%

-3.50

PE (1Yr Forward)

Current:

2.7x

12.0x

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Feb/03

Price/Book Value

Current:

2.5x

10.0x

Sep/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

Jun/98

Apr/97

-4.00 Nov/97

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Feb/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

Jun/98

Apr/97

Nov/97

0%

PBV hist

0.7x

PBV Forward

2.0x

8.0x 1.5x 6.0x

ROE (Trailing)

Current:

22.04

Dividend Yield (Trailing)

40.00

1.0

35.00

0.9

Current:

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Feb/03

Sep/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

Jun/98

Apr/97

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Feb/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

0.0x

Jun/98

0.0x Apr/97

0.5x

Nov/97

2.0x

Nov/97

1.0x

4.0x

0.00

0.8

30.00

0.7

25.00

0.6

20.00

0.5 0.4

15.00

0.3

10.00

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Feb/03

Sep/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

Jun/98

Apr/97

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Jul/02

Feb/03

Dec/01

May/01

Oct/00

Mar/00

Aug/99

Jan/99

Jun/98

Apr/97

0.0 Nov/97

0.1

0.00

Nov/97

0.2

5.00

Summary China Minzhong Food Corp. Ltd. CHINA Consumer Staples 12mth Forward PE P/BV (Trailing) Dividend Yield (Trailing) ROE (Trailing) Implied Value of Growth

369.06 5.472031 SEDOL B51VJ76 Food Products Latest Min 2.69 2.71x 0.69 0.73x 0.00 0.00 21.82 22.04 -3.34 -333.6%

Max 8.89 2.06 0.00 36.82 -0.27

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs

8

Median 6.40 1.50 0.00 29.66 -0.79

Average 5.59 1.32 0.00 28.98 -1.45

2 S.D.+ 9.81 2.12 0.00 42.05 0.72

2 S.D. 1.37 0.51 0.00 15.91 -3.61

11-May-12 As Of: 0.83 Local Price: 1.53 EPS: % to Min % to Max % to Med % to Avg -1% 228% 137% 107% -5% 182% 106% 81% -1% 0%

67% 92%

35% 76%

* Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

32% 57%

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Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

China Minzhong Food Corporation Limited: Summary of Financials Income Statement Rmb in millions, year end Jun Revenues % change Y/Y Gross Margin EBITDA % change Y/Y EBITDA Margin EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Minority Interest Net income (reported) % change Y/Y Net Profit (Recurring) Shares outstanding EPS (reported) Balance sheet Rmb in millions, year end Jun Cash Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets

FY10 1,423 34.5% 40.4% 489 26.9% 34.4% 461 26.3% 32.4% -24 433 25.9% -65 15.1% 0 367.5 27.6% 383 549 0.67 FY10 1,170 176 23 235 1,604 0 366 2,384

FY11 1,929 35.6% 41.5% 699 42.9% 36.2% 665 44.3% 34.5% -6 654 51.1% -87 13.3% 0 566.7 54.2% 566 557 1.02

FY12E 2,586 34.1% 39.5% 901 28.9% 34.8% 814 22.4% 31.5% -32 782 19.6% -78 10.0% 0 703.6 24.2% 704 557 1.26

FY13E 2,773 7.2% 37.2% 924 2.6% 33.3% 781 NM 28.2% -45 736 -5.8% -74 10.0% 0 662.5 -5.8% 662 557 1.19

FY14E 3,173 14.4% 35.2% 1,008 9.1% 31.8% 831 6.3% 26.2% -45 785 6.7% -79 10.0% 0 706.9 6.7% 707 557 1.27

Cash flow statement Rmb in millions, year end Jun Profit before tax Depreciation & amortization Change in working capital Other non-cash items Cash flow from operations Capex Disposal/(purchase) Cash flow from investing Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash

Free cash flow DPS Ratio Analysis Rmb in millions, year end Jun EBITDA margin EBIT margin Net profit margin SG&A/Sales

FY11 FY12E FY13E FY14E 162 474 725 1,016 230 323 370 453 54 86 101 127 798 798 798 798 1,245 1,682 1,994 2,395 0 0 0 0 Sales growth 1,114 1,827 2,185 2,507 EBIT growth 3,394 4,545 5,215 5,938 Net profit growth EPS growth Short-term loans 10 322 750 750 750 Payables 8 85 103 111 127 Interest coverage (x) Others 62 62 62 62 62 Net debt to equity Total current liabilities 80 469 916 923 939 Long-term debt 6 5 5 5 5 Sales/assets Other liabilities 11 13 13 13 13 Assets/equity Total Liabilities 98 487 933 941 957 ROCE Shareholders' equity 2,287 2,908 3,611 4,274 4,981 ROE Total Liabilities & equity 2,384 3,394 4,545 5,215 5,938 BVPS 4.16 5.22 6.48 7.67 8.93 Source: Company reports and J.P. Morgan estimates.

FY10 FY11 FY12E FY13E FY14E 433 654 782 736 785 28 34 87 143 178 105 -202 -107 -54 -94 88 89 32 45 45 598 488 683 751 791 -20 -958 -800 -500 -500 0 18 0 0 0 -176 -1,852 -800 -500 -500 716 0 0 0 0 -153 311 428 0 0 -19 55 0 0 0 0 0 0 0 0 545 365 428 0 0 967 -999 311 251 291 209 1,170 162 474 725 1,175 171 474 725 1,016

578 0.00

251 0.00

291 0.00

FY10 FY11 FY12E FY13E 34.4% 36.2% 34.8% 33.3% 32.4% 34.5% 31.5% 28.2% 25.8% 29.4% 27.2% 23.9% 6.9% 7.1% 8.0% 9.0%

FY14E 31.8% 26.2% 22.3% 9.0%

34.5% 26.3% 27.6% 27.6%

-470 0.00

35.6% 44.3% 54.2% 51.9%

20.43 118.50 -50.5% 5.7%

-117 0.00

34.1% 7.2% 14.4% 22.4% NM 6.3% 24.2% -5.8% 6.7% 24.2% (5.9%) 6.7% 27.75 7.8%

20.40 0.7%

22.26 -5.2%

0.75 0.67 0.65 0.57 0.57 1.04 1.17 1.26 1.22 1.19 25.1% 24.0% 21.4% 16.6% 15.4% 22.4% 21.8% 21.6% 16.8% 15.3%

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This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Asia Pacific Equity Research 14 May 2012

Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures



Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for China Minzhong Food Corporation Limited within the past 12 months.



Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: China Minzhong Food Corporation Limited.



Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: China Minzhong Food Corporation Limited.



Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking China Minzhong Food Corporation Limited.



Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from China Minzhong Food Corporation Limited. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan– covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or emailing [email protected] with your request. China Minzhong Food Corporation Limited (CMFC.SI, MINZ SP) Price Chart 3

OW S$2.2

OW S$1.6 2

OW S$1.45

OW S$2

OW S$1.7

OW S$1.1

N S$0.95

Price(S$)

1

Date

Rating Share Price (S$)

Price Target (S$)

26-May-10 OW

1.15

1.45

25-Aug-10

OW

1.27

1.60

15-Feb-11

OW

1.51

1.70

28-Mar-11

OW

1.57

2.00

09-May-11 OW

1.79

2.20

14-Oct-11

OW

0.95

1.10

13-Feb-12

N

1.06

0.95

0 Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage May 26, 2010.

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N= Neutral, UW = Underweight Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] In our Asia (ex-Australia) and UK small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’

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This document is being provided for the exclusive use of HENGLOONG KOK at OVERSEA-CHINESE BANKING CORP LIMITE Ying-Jian Chan, CFA (65) 6882-2378 [email protected]

Asia Pacific Equity Research 14 May 2012

coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.morganmarkets.com. Coverage Universe: Chan, Ying-Jian: China Agri-Industries (0606.HK), China Minzhong Food Corporation Limited (CMFC.SI), ComfortDelgro (CMDG.SI), First Resources Limited (FRLD.SI), Golden Agri-Resources Ltd (GAGR.SI), Indofood Agri Resources Ltd (IFAR.SI), Mewah International Inc (MEWI.SI), SMRT (SMRT.SI), ST Engineering (STEG.SI), SingPost (SPOS.SI), Wilmar International Limited (WLIL.SI) J.P. Morgan Equity Research Ratings Distribution, as of April 3, 2012

J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients*

Overweight (buy) 45% 51% 43% 70%

Neutral (hold) 43% 45% 48% 61%

Underweight (sell) 12% 34% 9% 53%

*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.morganmarkets.com , contact the primary analyst or your J.P. Morgan representative, or email [email protected]. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

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Asia Pacific Equity Research 14 May 2012

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