Call us impatient, but we’ve got a new riboflavin-of-the-month. And no, it’s not that Riboflavin.
Yesterday we bought 100 shares of Hubei Guangji Pharmaceutical at 17.00, our first foray into the Shenzhen market. Guangji is the world’s largest riboflavin supplier by production capacity, with a 90% market share in China, itself one-third of the global market. Also known as vitamin B2, riboflavin is mainly used in animal feed and as a food additive.
For the uninitiated, 2007 was something of a banner year for riboflavin, with prices sky-rocketing and Guangji riding the tide to post a 14-fold sales growth for the year. German chemical-making giant BASF must have noticed and summarily crashed the party by resuming regular riboflavin production in the third quarter of 2007.
Prices have plummeted since, down 70% from their 2007 peak, as of March. Guangji’s shares have dropped from its October high of 48.90 to 17.00, as of Thursday.
Still, Guangji is bullish on B2, announcing earlier this year that it expects net profits in the first half to grow by 170-270%. Not exactly 14-fold, but not too shabby.
Also, Guangji’s P/E ratio is currently at 17.82, lower than the average P/E ratio for others in the pharmaceutical industry, which leads us to hope we nabbed while it’s undervalued.