July 30, 2010
After spending the past year at nothing better than a four-star rank, Yongye International (Nasdaq: YONG ) has impressed enough top-performing members of our 165,000-strong Motley Fool CAPS community to finally start flirting with the venerated five-star level. A total of 670 members have given their opinion on the plant and animal nutrient company, with many of them offering analysis and commentary explaining the recent optimism.
The agriculture sector in China is hot, and CAPS members like Yongye's growing position in the burgeoning market. Business has flourished: The company followed up on a solid doubling of revenue in the first quarter by reporting preliminary second-quarter revenue growth of 93.5% over last year. Yongye also raised its full-year guidance, expecting strong demand to continue.
Similar trends in rural growth have helped other Chinese agriculture players and boosted investor confidence in Yongye. Hog-feed maker AgFeed Industries (Nasdaq: FEED ) and seed maker Origin Agritech (Nasdaq: SEED ) each posted big sales growth in their most recent quarters. And China Green Agriculture (NYSE: CGA ) is aiming for impressive 40% year-over-year sales growth in the next two fiscal years. The strength is also benefiting foreign players: Mosaic (NYSE: MOS ) expects China to be a key player in driving potash demand and PotashCorp (NYSE: POT ) forecasts that the long-term demand coming from the country will support crop commodity prices at levels above historical norms.
Investors also like Yongye's expansion plans: The company is growing its footprint and is confident that more Chinese farmers will adopt its plant and animal nutrient products. It has been boosting the number of independently owned branded stores and pushing further into more regions in the country. With a new plant coming online in September and a 50% capacity expansion at its existing plant-nutrient production facility, Yongye will dramatically boost its capacity for new revenue. Investors are seeing the same story play out with other companies -- for instance, pork processing company Zhongpin (Nasdaq: HOGS ) has been expanding rapidly and plans to tap new markets with a new plant and distribution center itself.
Do you think Yongye International deserves its improved status? Add your thoughts in the comments box below, or head over to CAPS to rate the company.