China Agritech Grows Profit: Under the Radar - TheStreet

China Agritech Grows Profit: Under the Radar

Fertilizer maker China Agritech is poised to profit as China's economy and population grows.
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) -- At the height of the economic turmoil of 2009 China's economy was still growing at 6.1%. That rate has since increased to 8.9%, quickly approaching the double-digit levels of growth the country enjoyed during the boom times of 2007.

At its current rate, China's economy will double in eight years and overtake Japan as the third biggest economy in the world, behind only the European Union and the U.S. Given this phenomenal growth, investors would be wise to invest in China sooner rather than later.

Companies like the Beijing-based

China Agritech


are a good way to harness that growth. China Agritech makes organic liquid compound fertilizers and other agricultural products that it sells exclusively in China. The company's stock has soared more than seven-fold during the past year because of its perfect positioning in a high-growth industry in a high-growth country.

Chinese companies might have a better chance of cashing in on the boom than foreign-owned firms. As the much publicized


(GOOG) - Get Report

fiasco highlighted earlier this week, conducting business in China can be more complicated than it would be in other countries. Whether the root is in xenophobia or a strong desire to support local companies, the prospect of a foreign company winning business over a Chinese one is unlikely.

China Agritech carries no debt and has a current ratio of 5.63, which reflects its strong cash flow. The company boasts a profit margin of 21% and a return on equity of 19%. Analysts expect revenue to increase 20% this year after the company increased revenue by a projected 28.8% in 2009.

With a population of 1.3 billion and an economy growing at 8.9%, China's influence will continue to expand as the country becomes more developed and diets change. China Agritech's fertilizers will likely play a key role in pushing farm production into overdrive to meet increasing food demand.

We upgraded our rating on China Agritech to "buy" on Oct. 14. The shares have since climbed 90%.

-- Reported by David MacDougall in Boston.

Prior to joining Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.