Susquehanna Maintains a 'Positive' Rating on American Dairy (ADY); Raises 2009 Estimates

August 18, 2009 9:51 AM EDT

Susquehanna maintains a 'Positive' rating on American Dairy (NYSE: ADY), price target $40.

Susquehanna analyst says, "It appears that 2Q09 EPS beat lowered consensus by a significant margin ($0.40 vs. consensus of $0.07), but the upside was largely attributable to a government subsidy ($6 million) and a gain from discontinuing operations ($3.3 million). Excluding these one-time items, EPS would have been a loss of $(0.06) (by our estimate), significantly below our expectations. Management reiterated its 2009 revenue guidance in the range of $330 million-$360 million. With industry-wide inventory trending down and seasonality into 2H09, we do believe the guidance is conservative and achievable. On the (conference) call, management expressed confidence in the growth of China's infant formula industry and ADY's ability to execute its plan to gain market share. While 2Q09 overall did not impress, we see ADY as a market share aggregator in the long run, with management targeting ~15% market share...We are raising our 2009 revenue estimate to $352 million (+82% Y/Y) and EPS estimate to $3.54 (+267% Y/Y). We are introducing our 2010 estimates with revenue of $498 million (+42% Y/Y) and EPS of $4.26 (+20% Y/Y)."

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American Dairy, Inc., through its subsidiaries, produces and distributes milk powder, soybean milk powder, and related dairy products in the People's Republic of China.

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