Deer Consumer Products (NASDAQ:DEER)

Rodman and Renshaw on DEER                       04/01/2011

DEER – Termination of Coverage

TERMINATION OF COVERAGE

Effective immediately, we are terminating coverage of Deer Consumer Products (NASDAQ: DEER) to allocate resources more efficiently within our coverage universe. We are restructuring our coverage along key consumer/retail verticals in which U.S.-listed Chinese companies have a more significant presence. Effective upon the termination of coverage, any of our prior financial projections on this stock should not be relied upon.

VALUATION. Our last rating on DEER shares was ‘Market Outperform.’ Our previous 12-month price target of $13 was based on ~12x our prior 2011 EPS estimate of $1.05, compared to the blended 2011 P/E average of 13.5x for U.S.-listed U.S. and emerging markets consumer electronics manufacturers and distributors. The key opportunity, challenge, and point of controversy for Deer are its penetration into the domestic China markets, both for its private label and Deer-branded products.

COMPANY DESCRIPTION

Founded in 1994 and headquartered in Shenzhen, China, Deer Consumer Products is a designerand manufacturer of small kitchen appliances with its core product lines in blenders and juicers. Untilrecently in 2009, the company acted exclusively as an original design manufacturer (“ODM”) and/or anoriginal equipment manufacturer (“OEM”), and distributed a majority of its products through third-partydistributors (e.g., Focus Electrics Group, Applica Inc., and Sattar) to international blue-chip householdappliance brand giants such as Back to Basics, Black & Decker, Betty Crocker, and Kenwood.Recognizing the emerging affluence of the middle class in China, the company began focusing on thedomestic consumer end markets in early 2009. In conjunction, Deer’s entryinto the China markets presented the company an opportunity to develop its brand name in a still-nascent and fragmented market. In accordance with the company’s 10-K filing, China domestic sales accounted for roughly 43.7% of total revenues in 2010.

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