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Why China New Borun (BORN) Is Soaring Today

NEW YORK (TheStreet) -- China New Borun  (BORN) was soaring 28.83% to $4.20 at 11:09 a.m. on Thursday after the Chinese producer and distributor of corn-based edible alcohol reported a surge in net income in its fourth-quarter results.

The company noted a 41% year-over-year increase in net income to $5 million. Basic and diluted earnings per American Depositary Share were 19 cents. Each ADS represents one of the company's ordinary shares. Total revenue increased 30.7% year over year to $107.9 million, while gross profit increased 44.3% to $12.9 million.

For the first quarter of the fiscal year 2014, China New Borun expects revenue in the range of $82 million to $86.9 million, a year-over-year increase of approximately 11% to 18%.

"We completed a solid fourth quarter, with total revenues exceeding the high-end of guidance and profitability expanding to a 12-month high," said Chairman and CEO Jinmiao Wang in the company's statement. "We also successfully completed initial sales of our new chlorinated polyethylene ("CPE") and foam insulation products, marking a new milestone in our expanded business scope.  Despite the challenging market environment over the past two years, we were able to earn positive net income in every single quarter, and as our momentum builds, we believe are well positioned to grow annual revenue, profitability and cash flow in 2014."

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TheStreet Ratings team rates CHINA NEW BORUN CORP -ADR as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINA NEW BORUN CORP -ADR (BORN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, BORN's share price has jumped by 56.54%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • BORN, with its decline in revenue, underperformed when compared the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Beverages industry. The net income has significantly decreased by 69.0% when compared to the same quarter one year ago, falling from $5.76 million to $1.78 million.
  • The gross profit margin for CHINA NEW BORUN CORP -ADR is currently extremely low, coming in at 9.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.09% significantly trails the industry average.
  • You can view the full analysis from the report here: BORN Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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