Zheng Hui Industry Corp Common (NASDAQ:ZHIC)

ZHENG HUI Plans for IPO.

Company Snapshot:

Engaged in hatching “Cherry Valley” duck and producing, processing, marketing and distributing frozen processed duck, duck feed and other duck-related products in the People’s Republic of China.

Industry Snapshot:

• The national output of poultry meats amounted to 7.85 million tons in the first half of 2008 with a growth rate of 8.2% compared to the same period in the previous year, according to China’s Ministry of Agriculture published by the China Animal Agriculture Association.
  
• Of the total national output of poultry, chicken accounts for 70%, duck accounts for 15.5%, and goose accounts for 14.4%.
  
• According to the aim of The Food Industry Development Outline of the Eleventh Five-Year Plan (2006-2010), the total output of meat would exceed 84 million tons in 2010, 20% of which (16.8 million tons) would be poultry meat.
  
• According to the data provided by the China Meat Association, China produces the largest amount of ducks in the world. The number of ducks slaughtered in China in 2009 accounted for 74.7% of the total amount in the world.

Post IPO Share Count:  TBA

Financial Snapshot:

• Gross profit for the first quarter of 2010 was approximately $1.8 million, or 19.37% of total revenues, as compared to approximately $1.8 million, or 23.73% of revenues for the first quarter of 2009. The decrease in the gross profit margin was attributable to increased cost of sales as a percentage of revenue. The increase in cost of sales as a percentage of revenue was primarily attributed to increased unit prices for corn and live ducks. We expect our growth rate to stay at approximately 20% in 2010 despite a slight decline in the first quarter due to increases in the unit price of corn and other raw materials of the feed.
  
• Our net income was approximately $1.0 million for the first quarter of 2010 as compared to net income of approximately $1.2 million for the first quarter of 2009. This translated to basic and diluted net income per common share of $0.48 and $0.48, and $0.58 and $0.58 for the first quarters of 2010 and 2009, respectively.