UPDATE: Oppenheimer Downgrades China New Borun; Removes PT
According to a research report published today, Oppenheimer has downgraded China New Borun (NYSE: BORN) shares from Outperform to Perform, and has removed its $7 PT.
“BORN grew 4Q11 revenue by 60.4%, exceeding our/Street estimates and guidance. Sales of crude corn oil, which BORN started in 1Q11, grew 64% quarter over quarter and made up 8.1% of revenue. However, an overall ASP increase could not catch up with the pace of cost increases, which led to 854/208bps year over year/qoq declines in gross margin. Gross margin has been shrinking for five consecutive quarters to a historically low 15.8% in 4Q11. Net income grew only 3.6% in 4Q, despite 60.4% growth in sales. We decide to move to the sideline, as we foresee margin pressure continuing in 2012 due to high corn prices (see Exhibit 1 of our full report, dated March 9) and intense competition,” Oppenheimer commented in the report.
China New Borun is currently trading at $2.83.
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