At a glance…

1) Fuqi International (FUQI)

• Design, production, wholesale and (increasingly) retail of jewelry in China
• Outstanding shares 27.6M
• Market cap ($20 share price) $540M
• Sales: $467M
• Cash $173M (over $6 per share)
• Debt $48M
• After a surprisingly robust third quarter, the expectations for the whole year are raised. Analyst expect 2009 earnings to be $2.23 per share
• For next year, they add only 3 cents to that, but we have a feeling this significantly understates 2010 opportunities as the company rapidly expands in the more profitable retail sector and the Chines jewelry market keeps on groing at a brisk pace
• We have already written extensively about this company, here and here and published four recent research reports (available here)

What’s there to like:

• Solid balance and track record
• Solid growth industry
• Move towards more profitable retail is just starting
• Very cheap metrics

What’s there not to like

• Cash-flow negative for some time, alternately due to increasing inventories or increasing accounts receivable

Technically (click to enlarge)

• Nice start of the year
• Real chance of breaking out of the downtrend
• We see these shares as a screaming buy at these levels.

2) China Green Agriculture (CGA)

• Research, development, production and distribution of environmentally friendly liquid fertilizer product (roughly 80% of revenue) called humic acid fertilizer and some other agricultural products like fruits, vegetables, flowers and colored seedlings (20%+)Shares outstanding 22.68M
• Market cap 375M (at $16.5 per share)
• Sales 37.6M
• Cash $35M
• Debt $2.2M
• Analist expect 91 cents per share profit for 2009, $1.51 for 2010
• We have covered this company before, like the basic research sheet
• And updates
• Very strong last quarter

What’s there to like

• Impressive operating and profit margins (50% and 43%)
• Solid growth industry: growing population with shrinking acreage of cultivable land
• Competitive product
• Innovating strength
• Solid balance sheet, almost no debt
• History of positive earnings surprises

What’s not to like

• Not that cheap anymore
• Complex product line up and distribution network (130 different organic fertilizers and 540 distributors)

Technically (click to enlarge)

• Nice uptrend still intact and seems getting steeper since the stellar quarter results published in mid November
• We can see no reasons for the uptrend not to last, bar a significant correction in the overall Chinese markets.