Zhongpin (NASDAQ:HOGS)

Third Quarter 2011 Results

If you have not yet read "17 Reasons not to Take Chardan's Wavering Opinion on Zhongpin Seriously", you can now access the report openly.

It is obvious that the issues surrounding HOGS have developed into a multi-faceted story that can become difficult to digest. That is why we feel it necessary to peel the HOGS onion one layer at a time so investors can appreciate the breadth and importance of each layer individually. In this installment we discuss our view of Chardan Capital’s take on the HOGS story as well as a look at Chardan’s track record in the ChinaHybrid space. After this article, we will follow-up with evidence regarding what we feel are material misrepresentations made by HOGS management.

On September 27, 2011 Chardan Capital quietly downgraded HOGS from Buy to Neutral and cut HOGS price target to $9.00 from $14.50. The irony of this move is that it was only on August 9, 2011 that Chardan reiterated its "buy" rating on HOGS as Global Hunter Securities was being criticized for downgrading the company. Now it seems Chardan has had second thoughts about its seemingly unquestioned acceptance of whatever story the HOGS management team spins for the market. Could this be a sign that Chardan's motive for their initial reiteration of the buy rating was to support the stock?

read more...http://geoinvesting.com/companies/duediligence/Chardans_Wavering_Opinion_on_Zhongpin.aspx

Yesterday we released our thorough due diligence on Zhongpin Inc. (HOGS). Based on our work and the observations of our investigators who have visited HOGS facilities on various occasions, we conclude that: HOGS is in fact processing and selling pork products in China. However, while HOGS is clearly not an "empty shell" we did find clear and substantial evidence of possible fraudulent activities.
Summary of Findings

1. Overstatement of SEC net income vs. SAIC filings by nearly 500% in 2009.
2. GEO estimates 2010 net income of $10-20 million vs. $58 million reported to the SEC.
3. Deliberate manipulation of SAIC filings.
4. Likely diversion of almost $150 million of reported capex.
5. Inconsistent trends between inventories and sales.
6. Repeated capital raisings, despite assurances to investors that none were needed.
7. Capex concerns already noted by Roth Capital resulting in downgrade.

Please see our full report.

Second quarter 2011 highlights:

• Revenues increased 70% in the second quarter 2011 to $366.5 million from $215.1 million in the second quarter 2010.
• Gross profit margin was 10.7% in the second quarter 2011 from 11.8% in the second quarter 2010. Operating profit margin was 6.5% in both second quarters. Net profit margin was 5.3% in the second quarter 2011 from 5.7% in the second quarter 2010.
• Net income increased 56% to $19.3 million in the second quarter 2011 from $12.4 million in the second quarter 2010.
• Basic earnings per share increased 33% to $0.48 in the second quarter 2011 from $0.36 in the second quarter 2010 on average basic shares outstanding that were 16% higher.
• Diluted earnings per share increased 37% to $0.48 in the second quarter 2011 from $0.35 in the second quarter 2010 on average diluted shares outstanding that were 15% higher.
• Zhongpin revised its guidance for the year 2011.

Mr. Xianfu Zhu, Chairman and Chief Executive Officer of Zhongpin Inc., said, "Our operations and growth strategy continued on plan in the second quarter.

"Revenues were up 70% and net income was up 56% from the prior second quarter, even with the expense associated with our aggressive expansions in markets and facilities. Total tonnage was up 6%, with average prices up 60%, second quarter over second quarter.

"Given our good results in the first half of 2011, we have revised our guidance and have fine-tuned our assumptions supporting our guidance.

"Product quality and safety, which remain our highest priorities, are engineered into our raw material selection, production, quality assurance and control processes, integrated I.T. system, and cold-chain logistics. Consumers and customers, when they choose Zhongpin products, can be sure that they are getting the highest food quality and safety, as well as great taste.

"We are on schedule in our construction projects. Those expansions will support growth in our current markets and in our geographic market expansions in northern and eastern China, which we expect will result in higher sales and a larger market share in the national pork market.

"In 2011, we are continuing our proven strategy and actions to sustain the trend-line growth we have achieved in the past several years. Our actions include supporting the breeding of premium sire boars to produce better hogs for food, expanding our geographic markets and distribution channels, building more production capacity to serve current and new markets, aggressive marketing to increase brand awareness and encourage higher sales, further streamlining our supply chain, extending our cold-chain logistics system, continuing to leverage our integrated information technology system, continuing product and process improvements, developing new products, and continuing employee training, all to sustain our rapid healthy growth to deliver our company's good financial performance for our shareholders.

"Although we usually prefer our own greenfield expansions, to augment our internal growth, we may also consider acquiring companies that have strong regional brand recognition and that produce prepared pork products using high-quality facilities. These additional operations would likely help us to build Zhongpin into an even stronger national brand; increase our market share, revenues, and net income; and strengthen our ability to take advantage of consolidation opportunities in China's meat industry."

"We remain on track to deliver a very good year in 2011."

Guidance for the year 2011

Mr. Warren Wang, Zhongpin's Chief Financial Officer, said, "We are revising our guidance for the year 2011.

"The revised guidance for 2011 is based on several assumptions and judgments that include:

• Continuation of China's policies designed to stimulate domestic consumption and economic growth.
• Average pork prices in China are expected to remain the relative high level for the rest of 2011, based on the assumption of steady economic growth and the forecast trend for the supply of live hogs and the cost to raise hogs.
• A higher percentage of sales from our higher-margin chilled pork and prepared pork products in 2011 than in 2010, while continuing to increase the sales volume of processed pork products to optimize our product structure.
• Average capacity utilization for the year of about 75% for pork products.
• Increasing distribution efficiencies and reduction in the duration of delivery times by expanding our cold-chain logistics system, networks, and service.
• Continuing to reinforce awareness, recognition, and selection of Zhongpin brand products in the major regional markets, to expand awareness of the brand across China, and to increase market share and the brand's price premium.
• And continuation of the Chinese government's support and subsidies for producers of agricultural products, such as Zhongpin. Total government subsidies for Zhongpin are expected to exceed $5 million in 2011.

"Given those comments and assumptions, here are the revised numbers.

"For the year 2011, we expect that Zhongpin's sales revenues should be within a range of US$1.33 billion to $1.37 billion.

"Gross profit margin is expected to be within the range of 11.2% to 11.8%.

"Net profit margin is expected to be within the range of 5.2% to 5.8%.

"Diluted earnings per share for the year 2011 is currently expected to be within the range of $1.80 to $2.05 per share, assuming average diluted common shares outstanding of about 38.0 million shares in 2011.

"Zhongpin believes that China's meat and food industry will continue to consolidate in 2011 at a more rapid pace than in 2010, which may result in higher market shares for our main competitors. However, we believe that Zhongpin is equipped to meet the challenge of increasing competition and that our guidance for 2011 can be achieved."

NEW YORK, NY--(Marketwire - Jul 29, 2011) - Pork prices have skyrocketed close to all-time this year, prompting the Chinese government to step in to stabilize the market. This is welcome news for larger Chinese agricultural firms, as generous government investments are encouraging increased hog production. The Bedford Report examines the outlook for companies in China's Consumer Goods Sector and provides equity research on AgFeed Industries, Inc. (NASDAQ: FEED) and Zhongpin, Inc. (NASDAQ: HOGS)

The Bedford Report releases investment research on China's consumer goods sector so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at www.bedfordreport.com and get exclusive access to our numerous analyst reports and industry newsletters.

The Bedford Report provides Market Research focused on equities that offer growth opportunities, value, and strong potential return. We strive to provide the most up-to-date market activities. We constantly create research reports and newsletters for our members. The Bedford Report has not been compensated by any of the above-mentioned companies. We act as an independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at: http://www.bedfordreport.com/disclaimer.

NEW YORK, NY--(Marketwire - Jul 29, 2011) - Pork prices have skyrocketed close to all-time this year, prompting the Chinese government to step in to stabilize the market. This is welcome news for larger Chinese agricultural firms, as generous government investments are encouraging increased hog production. The Bedford Report examines the outlook for companies in China's Consumer Goods Sector and provides equity research on AgFeed Industries, Inc. (NASDAQ: FEED) and Zhongpin, Inc. (NASDAQ: HOGS)

The Bedford Report releases investment research on China's consumer goods sector so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at www.bedfordreport.com and get exclusive access to our numerous analyst reports and industry newsletters.

The Bedford Report provides Market Research focused on equities that offer growth opportunities, value, and strong potential return. We strive to provide the most up-to-date market activities. We constantly create research reports and newsletters for our members. The Bedford Report has not been compensated by any of the above-mentioned companies. We act as an independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at: http://www.bedfordreport.com/disclaimer.

CHANGGE and BEIJING, China, July 6, 2011 /PRNewswire-FirstCall/ -- Zhongpin Inc. ("Zhongpin", Nasdaq: HOGS), a leading meat and food processing company in the People's Republic of China, today announced that its board of directors has approved a stock repurchase program of up to $10 million of its outstanding stock over the next 12 months. The stock repurchase program was approved by Zhongpin's board of directors onJuly 5, 2011, became effective on July 5, 2011, and is authorized to be in effect through July 4, 2012.

Mr. Xianfu Zhu, Zhongpin's Chairman and Chief Executive Officer, said, "Our board of directors approved this share repurchase program to demonstrate its confidence in the long-term growth outlook for Zhongpin and its desire to create value for our shareholders. Our good cash position gives us the flexibility both to continue our aggressive growth strategy and to buy our shares through the stock repurchase plan."

Under the stock repurchase program, Zhongpin is authorized to repurchase up to $10 million of its issued and outstanding common shares from time to time in open-market transactions on Nasdaq at prevailing market prices, in negotiated transactions off the market, in block trades, in trades pursuant to a Rule 10b5-1 repurchase plan that allows Zhongpin to repurchase its shares during periods in which it may be in possession of material non-public information, or otherwise, in accordance with applicable federal securities laws, including Rule 10b-18.

The repurchases will be made at management's discretion, subject to restrictions on price, volume, and timing. The timing and extent of any purchases will depend upon market conditions, the trading price of its shares, and other factors. The repurchase program does not obligate Zhongpin to make repurchases at any specific time or situation.

Zhongpin's board of directors will periodically review the share repurchase program and may authorize adjustments to the program's terms and size. The board may also suspend or discontinue the repurchase program at any time.

Zhongpin expects to pay for the repurchased shares using internally available cash. As of March 31, 2011, Zhongpin's cash and cash equivalents totaled $177.6 million.

Zhongpin had 40.3 million common shares outstanding as of March 31, 2011.

CHANGGE and BEIJING, China, June 20, 2011 /PRNewswire-Asia-FirstCall/ -- Zhongpin Inc. ("Zhongpin", Nasdaq: HOGS), a leading meat and food processing company in the People's Republic of China, today announced that Mr. Xianfu Zhu, Zhongpin's Chairman and Chief Executive Officer, and Mr. Baoke Ben, Director and Executive Vice President, expect to use their personal funds to purchase up to an aggregate total of $1 million worth of Zhongpin's common stock in open market transactions within the next six months.

Mr. Xianfu Zhu, Zhongpin's Chairman and Chief Executive Officer, said, "Mr. Ben and I are confident that Zhongpin's outlook continues to be very attractive, especially given Zhongpin's aggressive growth strategy, China's good economy, and the strong market in China for Zhongpin's food products. Our expected purchases also indicate our belief that our stock is currently undervalued."

The share purchases will be made in a manner consistent with Zhongpin's stock trading policy and appropriate securities laws.

Rodman and Renshaw on HOGS                   5/10/2011

1Q11 Results a Touch Shy of Expectations; Tweaking Price Target to $21

Zhongpin Inc. (“Zhongpin”, Nasdaq: HOGS, “Market Outperform”) reported 1Q11 results that were either in-line or slightly below our expectations. Total revenue increased 40% YoY to $285.8 million, but was below our estimate of $288.3 million. Gross profit came in at $35.9 million, a touch shy of our estimate of $36.2 million. Actual gross margin of 12.6% however, was almost in-line with our estimate of 12.5%. Net income increased 27% YoY to $16.9 million, below our estimate of $17.9 million. This translates to diluted EPS of $0.47, a penny shy of our estimate of $0.48. The company reiterated its prior 2011 guidance of realizing revenue of $1.18-1.23 billion, gross margin between 11.7% and 12.4%, and net margin between 5.7% and 6.3%. It also provided an updated EPS guidance (after the March secondary issuance) of $1.66-1.91 for the year.

1Q11 Highlights and Discussions

Product segment contributions Chilled pork, with 1Q11 sales of $168.6 million, continued to be the largest revenue contributor for Zhongpin, generating 59.0% of the company’s total revenue. During Q1, chilled pork tonnage increased 9% YoY while the average selling price increased 35% YoY. Frozen pork revenue also increased, up 46% YoY, to $73.5 million. It benefited from an average selling price increase of 46% YoY while sales volume actually decreased 0.3% YoY. Prepared pork provided revenue of $41.3 million on higher sales volume (up 25% YoY) and lower average price (down 9% YoY). It is worth noting that revenue from prepared pork products actually decreased sequentially from $45.7 million in 4Q10.

Rest of 2011 looks to be supported by firm hog price and capacity expansion Hog price in China has been firm in the first half of 2Q11, and we expect it will remain strong for the rest of 2011 in light of China’s increasingly inflationary environment. We also believe Zhongpin will benefit from its capacity expansion efforts as the 36,000-MT prepare pork plant in Tianjin is expected to come on-line in Q2 and the 25,000-MT frozen pork and 70,000-MT chilled pork plants are expected to start operations in Q4. In this regard, we expect the company will have no problem achieving its 2011 financial performance guidance.

The Clenbuterol Pork Scandal and its effect on Zhongpin On March 15, CCTV (China’s sole national TV network) exposed some tainted pork products from Henan province containing chemical clenbuterol. The chemical, harmful to human, was illegally used as a feed additive by unscrupulous pig farmers for the purpose of producing leaner pork. Henan Shuanghui (SHE: 000895, Not Rated), China’s largest pork processor, was at the center of this scandal, while China Yurun (HKG: 1068, Not Rated), another major domestic meat processor, also announced a recall of 100 boxes of luncheon meat that contained the chemical. The scandal provoked a nationwide outrage that even led to comments on food safety by China’s president, Hu Jintao.


Notice Regarding Privacy and Confidentiality:


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

First quarter 2011 highlights:

• Revenues increased 40% in the first quarter 2011 to $285.8 million from $204.3 million in the first quarter 2010.
• Net income increased 27% to $16.9 million in the first quarter 2011 from $13.3 million in the first quarter 2010.
• Basic earnings per share increased 24% to $0.47 in the first quarter 2011 from $0.38 in the first quarter 2010 on average basic shares outstanding that were 3% higher.
• Diluted earnings per share increased 24% to $0.47 in the first quarter 2011 from $0.38 in the first quarter 2010 on average diluted shares outstanding that were 3% higher.
• Gross profit margin increased to 12.6% in the first quarter 2011 from 12.2% in the first quarter 2010.
• Zhongpin reaffirmed its prior guidance for the year 2011 and revised its guidance earnings per share numbers for the higher average shares that are outstanding as a result of its successful offering of 5 million common shares that was completed on March 22, 2011.
• In mid-April 2011, Zhongpin signed a framework agreement with China Construction Bank, Henan Branch, that is expected to provide approximately RMB 10 billion in financial support and services to assist Zhongpin in its growth.

"With our good results in the first quarter, we have reaffirmed our previous guidance and have revised only our guidance earnings per share numbers to account for the higher average shares that are outstanding during 2011 as a result of the completion of our follow-on offering.

• "For the year 2011, we expect that Zhongpin's sales revenues should be within a range of US$1.18 billion to $1.23 billion.
• "Gross profit margin is expected to be within the range of 11.7% to 12.4%.
• "Net profit margin is expected to be within the range of 5.7% to 6.3%.
• "Revising only for the higher average shares expected for the year 2011, the resulting diluted earnings per share for the year 2011 is currently expected to be within the range of $1.66 to $1.91 per share, assuming average diluted common shares outstanding of about 40.5 million shares in 2011.
• "Zhongpin believes that China's meat and food industry will continue to consolidate in 2011 at a more rapid pace than in 2010, which may result in higher market shares for our main competitors. However, we believe that Zhongpin is equipped to meet the challenge of increasing competition and that our guidance for 2011 can be achieved."

NEW YORK, March 23, 2011 /PRNewswire-Asia/ -- Zhongpin Inc., a leading meat and food processing company in the People's Republic of China, today announced the closing on March 22, 2011 of its follow-on underwritten registered public offering of 5,000,000 shares of common stock at a price of $14.10 per share.

The total gross proceeds of the Offering to Zhongpin were $70,500,000. The aggregate net proceeds received by the Company totaled approximately $66,420,000 after deducting underwriting discounts and commissions and the offering expenses paid by the Company.

Zhongpin intends to use the net proceeds from the Offering for the construction of new processing and cold chain logistics facilities and for general corporate purposes.

Rodman & Renshaw on HOGS

4Q10 Results Strong, but Lowering Price Target Due to Dilution 

Zhongpin Inc.(“Zhongpin”, Nasdaq: HOGS, Market Outperform) reported 4Q10 results that mostly matched or exceeded our and Street’s expectations. Total revenue climbed 32.9% YoY to $286.3 million, higher than our estimate of $264.3 million and Street consensus of $269 million. Gross margin was 11.6%, 20bps lower than 4Q09 but in-line with our expectation. Non-GAAP net income (excluding stock compensation expenses) grew 50.3% YoY to $18.6 million, above our estimate of $14.4 million and Street consensus of $16.1 million. Non-GAAP EPS increased 46.3% YoY to $0.52, easily beating both our estimate of $0.41 and consensus of $0.42. On a yearly basis, total revenue rose 30.4% YoY to $946.7 million, exceeding the company’s guidance range of $900 million to $940 million. Net income reached $58.3 million, or $1.65 per diluted share, also higher than the respective guidance range of $52-57 million and $1.49 to $1.64 per diluted share. 

4Q10 Highlights and Discussions 

Prepared pork products became the largest growth driver: During 4Q10, revenue from prepared pork products grew 62.5% YoY to $45.7 million, primarily due to larger volume sold partially offset by lower ASP. The segment contributed 16.0% of total revenue in the quarter. We expect this growth will continue to outpace that of frozen pork and chilled pork. Since the prepared pork segment carries a much higher gross margin (~20% vs. 11% for chilled pork and 8% for frozen pork), we expect it will drive margin expansion considerably going forward as it contributes a larger portion of revenue. 

Aggressive capacity expansion bears fruits: Zhongpin has been aggressively expanding production capacity in various new markets, which significantly drove its volume growth. As of December 31, 2010, the company had annual capacity of 563,760 MT for chilled and frozen pork, 90,000 MT for prepared pork products, 20,000 MT for pork oil, and 30,000 MT for vegetables and fruits. Looking forward to 2011, Zhongpin will have additional capacity come online, including 195,000 MT for chilled and frozen pork and 86,000 MT for prepared pork products. The company expects to lease, acquire, or build new facilities to support new market development, which we believe is appropriate and prudent. We note that, except the facilities in Gongzhuling, Jilin (leased) and Deyang, Sichuan (acquired), all other current facilities were built or being built by Zhongpin. 

Guidance for 2011 provided: Zhongpin expects revenue will be in the range of $1.18 billion and $1.23 billion. Gross margin is expected to be within the range of 11.7% to 12.4% and net margin within the range of 5.7% to 6.3%. Diluted EPS is guided to between $1.89 and $2.18, assuming average diluted common shares outstanding of 35.5 million in 2011. 

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Year 2010 highlights:

• Revenues increased 30% to $946.7 million in 2010 from $726.0 million in 2009.
• Net income increased 28% to $58.3 million in 2010 from $45.6 million in 2009.
• Basic earnings per share increased 13% to $1.67 in 2010 from $1.48 in 2009 with average basic shares outstanding being 13% higher than 2009.
• Diluted earnings per share increased 13% to $1.65 in 2010 from $1.46 in 2009 on average diluted shares outstanding being 13% higher than 2009.
• Zhongpin's 2010 results exceeded the Company's guidance of revenues within a range of $900 million to $940 million, net income within the range of $52 million to $57 million, and diluted earnings per share within the range of $1.49 to 1.64 per share.
• Gross profit margin decreased to 11.7% in 2010 from 11.9% in 2009.
• Zhongpin added 89,000 metric tons of annual capacity for pork products, vegetables, and fruits during 2010 to bring total capacity at year end to 703,760 metric tons.
• Adjusted EPS was $1.68 vs. $1.46

2010 vs. 2009 Fourth quarter EPS was  $0.54 vs. $0.36

Mr. Xianfu Zhu, Chairman and Chief Executive Officer for Zhongpin, said, "The year 2010 was a very good year in operations and financial results, especially given some unusual sustained increases in hog prices during part of the year. Our revenues increased mainly due to our capacity expansions, higher sales to existing customers, new sales volume in new geographic markets, expanded points of sales, new customers, and emphasis on our higher margin products. These factors together with the marketing of our brand, advertising, in-store promotions, and the effort of the sales team helped to grow revenues by 30% in 2010."

Outlook for pork demand in China

Mr. Zhu continued, "Our fundamental strategy has proven its effectiveness in the past several years. The major objectives, which are designed to create additional value for our shareholders, include:

• increase our brand recognition and sales,
• expand our market presence,
• increase our production capacity,
• expand and optimize our product lines, and
• maintain our technological superiority.

"China's economy continues to grow rapidly, and pork continues to be Chinese consumers' preferred protein. We believe the outlook for China's pork processing industry remains quite positive. We plan to build a leading brand and gain increased market share and are expanding our processing plants and distribution networks to satisfy increasing demand for our high quality products."

In 2011, Zhongpin expects demand for pork in China and the results of the pork and pork products segment of its business to remain strong. While supply is expected to be ample, live hog prices are expected to increase in the first half of 2011. Zhongpin anticipates that its gross profit margin in 2011 will remain stable.

Mr. Zhu continued, "The outlook for the Chinese economy, Chinese food processing industry, and for Zhongpin continues to be encouraging, so for our guidance for the year 2011, we expect to report higher revenues, net income and earnings per share. We believe it will be another very good year for Zhongpin."

Guidance for the year 2011

Mr. Warren Wang, Zhongpin's Chief Financial Officer, said, "For the year 2011, we expect that Zhongpin's sales revenues should be within a range of US$1.18 billion to $1.23 billion, with gross profit margin within the range of 11.7% to 12.4%, and net income margin within the range of 5.7% to 6.3%. The resulting diluted earnings per share for the year 2011 is currently expected to be within the range of $1.89 to $2.18 per share, assuming average diluted common shares outstanding of about 35.5 million shares in 2011.

"This guidance is based on several assumptions and strategies that include:

• Continuation of China's policies designed to stimulate domestic consumption and economic growth.
• Average pork prices in China are assumed to increase between 5 and 10% in 2011 from 2010, which would be consistent with steady economic growth and relatively modest inflation.
• A higher percentage of sales from our higher-margin chilled pork and prepared pork products in 2011 than in 2010, while continuing to increase the sales volume of processed pork products to optimize our product structure.
• Average capacity utilization for the year of about 79% for pork products.
• Increasing distribution efficiencies and reduction in the duration of delivery times by expanding our cold-chain logistics system, networks, and services.
• Continuing to expand awareness, recognition, and selection of Zhongpin brand products in the major regional markets, to reinforce awareness of the brand across China, and to increase market share and the brand's price premium.
• And continuation of the Chinese government's support and subsidies for producers of agricultural products, such as Zhongpin. Total government subsidies for Zhongpin could exceed $5 million in 2011.

"Zhongpin believes that China's food processing industry will continue to consolidate in 2011 at a more rapid pace than in 2010, which may result in higher market shares for our main competitors. However, we believe Zhongpin is equipped to meet the challenge of increasing competition and that our guidance for 2011 can be achieved."

NEW YORK and BEIJING, China, March 7, 2011 /PRNewswire-Asia-FirstCall/ -- Zhongpin Inc, today announced that it has begun a follow-on common stock offering.  Zhongpin will offer 5 million shares of common stock and non management stockholders will offer 530,000 shares of common stock, with an over-allotment option of up to 15 percent of the offering size.  

Contradicts verbaige in the just released  2010 10K

We believe our existing cash and cash equivalents, together with our ability to secure bank borrowings, will be sufficient to finance our investment in new facilities, with budgeted capital expenditures of approximately $142.8 million over the next 12 months, and to satisfy our working capital needs. We intend to satisfy our short-term debt obligations that mature over the next 12 months through additional short-term bank loans, in most cases by rolling the maturing loans into new short-term loans with the same lenders as we have done in the past.

BEIJING and CHANGGE, China, Dec. 13, 2010 /PRNewswire-FirstCall/ -- Zhongpin Inc. today announced that it would build a new production, research & development, test, and training complex in its home city of Changge in Henan province of China.

The new facility will add 100,000 metric tons of capacity for prepared pork products, including Chinese-style, western-style, half-cooked, and easy-to-cook pork products. Adjacent to the production facility will be a new center for advanced research & development, test, training, and other support functions.

Mr. Xianfu Zhu, Chairman and Chief Executive Officer of Zhongpin Inc., said, "This expansion will add capacity for our higher-margin downstream products and will serve our central China market and adjacent markets. It will substantially enhance our R&D and further support our expanding market share in the growth regions of China. This new facility proves that we remain committed to doing everything possible -- using the most advanced technologies and processes -- to continue delivering new product innovations that will be desired by China's citizens, delivering food at the highest standards of product quality and safety to every customer, and delivering strong long-term returns to our shareholders."

Zhongpin plans to invest $58.5 million on the construction, excluding the land use rights that Zhongpin already owns. More than 80% of the production equipment will be internationally sourced. Zhongpin consistently selects the best and most advanced equipment, processes, and integrated information systems for its plants. The company's advanced cold-chain logistics system will support the expanding capacity. The payback period for the project is expected to be about 5.75 years.

Construction for the first phase of 50,000 metric tons for prepared pork products is scheduled to start in the first quarter 2011 and be completed by the third quarter 2011, and the second phase, also with an annual capacity of 50,000 metric tons for prepared pork products, is expected to be completed in the fourth quarter 2012. The R&D, test, and training center is also expected to open by the fourth quarter 2012.

We may sell any combination of these securities in one or more offerings, up to an aggregate offering price of $250,000,000 on terms to be determined at the time of offering. In addition, from time to time, the selling stockholders identified in this prospectus under the heading “Selling Stockholders,” may sell up to an aggregate of 9,562,505 shares of our common stock held by them. We will not receive any proceeds from the sale of our common stock by the selling stockholders.

Unless otherwise specified in the applicable prospectus supplement, we intend to use the net proceeds from the sale of our securities offered by this prospectus for general corporate purposes, including, without limitation, the construction of new processing and cold chain logistics facilities as well as repayment of bank loans and working capital needs. Pending the application of the net proceeds, we expect to invest the proceeds in investment grade, interest bearing securities.

HOGS commented on price trends

Mr. Xianfu Zhu, Chairman and Chief Executive Officer of Zhongpin Inc., said, "We noticed that China's State Council issued 16 measures to stabilize consumer prices and to ensure market supplies. Excluding direct price intervention items, the 16 measures (listed below) focus on production development, stabilization of supply, reduction of delivery costs, standardization of market order, and enhancement of market supervision."

Rodman & Renshaw

3Q10 results slightly missed expectations Zhongpin’s sales revenue for the quarter was $241.1 million, slightly below our expectation of $242.2 million, but clearly missed the much more optimistic Street consensus of $246.6 million. GAAP net income for the quarter was $14.7 million, below our estimate of $15.0 million. Diluted GAAP EPS for the quarter was $0.42, a penny shy of both Street and our expectations of $0.43. On the margin side, gross margin was 11.3%, below our estimate of 12.0%. Net margin was 6.1%, a touch shy of our 6.2% projection. 

The company also maintained its previous guidance for 2010: revenue for the year will be between $900 million and $940 million; gross profit will be between $106 million and $115 million; net income will be within the range of $52 million to $57 million; and full year diluted EPS will be between $1.49 and $1.64.

Our take In our opinion, the company has actually delivered a fairly respectable financial performance. We believe the slight miss was largely due to the Street as a whole having an overly optimistic expectation on the back of increasing hog prices in China during the past quarter. Unfortunately for the company, pork prices did not increase as much and as fast as hog prices did. This, coupled with a typical seasonality (Q3 tends to be a weaker quarter for pork sales) and the company’s efforts of controlling sales in regions with what it believed were less-than-ideal pork prices, led to the below-expectation top line result as well as some pressure on the margin front. Aside from that, we believe Zhongpin’s operations were pretty much as-expectedly strong. Looking forward to Q4, we expect pork prices will catch up to the increases in hog prices for the second half of the quarter and the spread between the two should return to more of a normal level. Thus we expect Zhongpin’s margins will improve from their Q3 levels. 

Maintaining Market Outperform while increasing PT to $26 We are maintaining our Market Outperform rating while increasing our price target on the shares of Zhongpin to $26, from $18 previously. We now expect the company will report 2010 revenue, gross profit, and EPS of $924.8 million, $108.2 million, and $1.63, respectively. Our new $26 price target is based on the shares trading at 13x our 2011 EPS estimate of $2.01. The 13x multiple represents a slight discount to the average P/E multiple of 14x currently commanded by Zhongpin’s American and Chinese peers. We believe Zhongpin, with its Chinese industry leadership position and strong growth potential, justifies such a valuation. 

Major Risks to our rating include the company's ability to maintain an adequate hog supply, movement in pork prices, government and environmental regulations, additional capital needs for future growth, currency exchange risk, as well as country and political risks related to operating in China.

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Third Quarter 2010 and recent highlights:

• Net sales revenues increased 24 percent in the three months ended September 30, 2010 to $241.1 million from $194.9 million in the third quarter 2009.

• Net income increased 11 percent to $14.7 millionin the third quarter 2010 from $13.2 million in the third quarter 2009.

• Basic and diluted earnings per common share declined $0.02 or 5 percent to $0.42in the third quarter 2010 from$0.44in the third quarter 2009, on higher net income but with higher weighted average number of shares outstanding in the third quarter 2010.

• Since the end of the second quarter of 2010 through early November, hog prices have increased more rapidly than pork prices. We estimate that pork prices will gradually increase so that the spread between pork prices and hog prices will return to their historical relationship.

Guidance maintained

Zhongpin is maintaining its prior guidance for the year 2010.

Mr. Warren Wang, Zhongpin's Chief Financial Officer, said, "For the year 2010, we continue to believe that Zhongpin's

• Sales revenues should be within a range of$900 million to $940 million

• Gross profit within the range of $106 million to $115 million

• Net income within the range of$52 million to $57 million.

• The resulting diluted earnings per share for the year 2010 is currently expected to be within the range of $1.49 to $1.64 per share."

This guidance is based on several assumptions and strategies that include:

• Continuation of China's policies designed to stimulate domestic consumption and economic growth;
• Higher average pork prices in China in 2010 than in 2009;
• A higher percentage of sales from our higher-margin chilled pork and prepared pork products in 2010 than in 2009, while increasing the sales volume of processed pork products as the priority to optimize our product structure;  
• Average capacity utilization of about 75 percent for pork products;
• Increasing distribution efficiencies from expansion of our cold-chain logistics system and service areas;
• Growing awareness of the Zhongpin brand in regional markets and emerging brand awareness across China; and
• Continuation of the Chinese government's support and subsidies for producers of agricultural products, such as Zhongpin.
  

Zhongpin believes that China's food processing industry will continue to consolidate, which may result in higher market shares for our main competitors. However, we believe Zhongpin is equipped to meet the challenge of increasing competition and that our guidance for 2010 can be achieved.

Globa lHunter on HOGS

We initiated coverage of Zhongpin in June 2010 with an $18 price target and selected it as one of our top picks for the year. Subsequently, on October 11, 2010, we raised our price target to $24 citing the recent positive trends in pork prices coupled with increased investor interest in the name, leading to a multiple expansion. Our $24 price target was based on 11.1x FY2011 on a P/E basis and 9.1x FY2011 on an EV/EBITDA basis. Zhongpin’s stock price has had a phenomenal run since our initiation, appreciating over 100% from recent lows. At the current price of approximately $23.16 per share, we believe Zhongpin’s stock is fairly valued based on our 2011 estimates and do not foresee material appreciation in the near term.
 
Zhongpin reported Q3 results, basically in line with estimates, showing a slight miss relative to both top and bottom line estimates and reiterating its previous FY10 guidance. We are concerned that the recent run up in share price, which has achieved our price target of $24, indicates that investors were expecting an ahead of consensus quarter and likely increase of guidance. As a result of both our price target having been met and our concern regarding investor expectations, we are reducing our rating to Neutral. Shares have appreciated over 80% since our June initiation, closing at $23.16 yesterday, which translates to 11.7x FY2011 on a P/E basis and 9.8x FY2011 on an EV/EBITDA basis. We remain positive on the Chinese agriculture and food processing industries as a whole and Zhongpin’s prospects in particular; however, we feel shares of Zhongpin have become fairly priced at these levels relative to near term earnings growth prospects.
 
Key points:

Zhongpin reported Q3 results and reiterated its previous FY10 guidance. Revenues for the quarter came in at $241.1MM, corresponding to 23.7% Y/Y growth; however, the number was slightly below ours and consensus estimates of $246.2MM and $246.7MM, respectively. Gross margins have contracted by ~90bps Y/Y, showing 11.3%, below our estimate of 12%, while gross profits in dollar terms grew by 15.1% Y/Y to $27.3MM. The primary reason behind the revenue miss and margin contraction was the significant increase in hog prices since late October due to government purchases initiated to stabilize hog prices and protect hog farmers. This inflated Zhongpin’s input costs but was not reflected in an increase in pork product ASP by enough to offset it. The company expects pork prices to continue to rise in the near term due to the approaching holiday season and resulting strong demand, which should help to normalize the company’s margins going forward.
 
Operating income in Q3 increased by 2.2% Y/Y to $15.8MM, while operating margin contracted by 130bps to 6.6%; below our expectations of $18.4MM and 7.5%. SG&A expenses increased Y/Y due to higher advertising costs and depreciation, as well as a $0.5MM increase in bad debt provision. Interest expense also increased during the quarter as a result of additional $35.7MM in long term and $3.2MM in short term debt. The company benefited during the quarter from $1MM in government subsidies and $1.1MM in other income stemming from the reversal of a tax payable accrued from the sale-lease back transaction. Zhongpin reported net income of $14.7MM, or $0.42 per fully diluted share, vs. our and consensus estimates of $0.43.
 
On the earnings call, management reaffirmed its prior full year 2010 guidance. Zhongpin continues to expect full year revenue in the $900MM-$940MM range and gross profit in the $106MM-$115MM range, corresponding to approximately 12% gross margin. The company further stated that it expects net income in the $52MM-$57MM range, which comes out to fully diluted EPS of $1.49-$1.64.

Maxim on HOGS

 We expect HOGS to report quarterly results inline with or slightly below consensus estimates. Consensus estimates are revenue of $246M and GAAP EPS of $0.43, above our estimates of revenue of $237M and EPS of $0.39. Our revenue estimate represents 10% q/q and 22% y/y growth, respectively, while our EPS estimate represents a 10% q/q increase but a 12% y/y decline.

We are raising our price target to $27, from $18. The new price target is based on 17x and 15x our 2010 and 2011 EPS estimates, respectively, or 50% and 40% discounts to Chinese peers. With pork retail prices likely to continue increasing in China and the company’s deep discount to its peers, we believe this higher price target is well supported. Our estimates remain unchanged.

Second quarter 2010 and recent highlights:

• Net sales revenues increased 33 percent in the three months ended June 30, 2010 to $215.1 million from $161.8 million in the second quarter 2009.
  
•  Net income increased 16 percent to $12.4 million in the second quarter 2010 from $10.7 million in the second quarter 2009.
  
• Basic earnings per share were unchanged at $0.36 per share for both second quarters on 17 percent higher basic weighted average shares outstanding. Diluted earnings per share decreased 3 percent to $0.35 in the second quarter 2010 from $0.36 in the second quarter 2009 on higher diluted weighted average shares outstanding.
  
• Hog and pork prices in the second quarter 2010 decreased about 10 percent from the second quarter 2009, primarily because the supply of hogs was higher than the market demand. Hog and pork prices appear to have reached bottom in mid-June, since prices have rebounded about 15 to 20 percent higher from mid-June through early August. Zhongpin believes prices will continue to increase gradually during the remainder of 2010.
  
• Prior guidance for the year 2010 has been maintained.

For this current year, given our good performance during the first half, we believe the outlook for 2010 continues to be quite encouraging, so we are reaffirming our previous performance guidance." Guidance maintained Zhongpin is maintaining its prior guidance for the year 2010. Mr. Warren Wang, Zhongpin's Chief Financial Officer, said, "For the year 2010, we continue to believe that Zhongpin's:

• Sales revenues should be within a range of $900 million to $940 million.
• Gross profit within the range of $106 million to $115 million.
• Net income within the range of $52 million to $57 million.
• The resulting diluted earnings per share for the year 2010 are currently expected to be within the range of $1.49 to $1.64 per share."
  

Mr. Warren Wang, Zhongpin's Chief Financial Officer, said, "For the year 2010, we continue to believe that Zhongpin's sales revenues should be within a range of $900 million to $940 million, with gross profit within the range of $106 million to $115 million and net income within the range of $52 million to $57 million. The resulting diluted earnings per share for the year 2010 is currently expected to be within the range of $1.49 to $1.64 per share vs $1.46 in 2009."

Source: PR Newswire (March 11, 2010)

We are removing Zhongpin from the GeoBargain list.  The Company has issued 2010 guidance that will result in earnings per share growth of less than 30.0%.  This comes off the heals of a recent reduction in its 2009 guidance.  We will certainly revisit  HOGS for a reassessment of our decision .   Zhongpin  was placed on the GeoBargain list on May 6 2009 at $9.54.

Source: (PR Newswire January 11, 2009)

^a Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . For a more complete explanation of the company's definition of non-GAAP please refer to the referenced financial press releases. The GeoTeam® non-GAAP figures may, from time to time,  differ from company supplied figures.

^b For valuation purposes, The GeoTeam® prefers to adjust EPS to reflect a standard United States tax rate of 36%