China-Biotics Inc (NASDAQ:CHBT)

China-Biotics came through once again reporting improves third quarter financial results, exceeding analyst estimates by $0.10.

These results are encouraging and give us hope that the company will be able to work the potential dilution of a recent stock offering.

Recall comments from our previous note on July 14, 2009:

Further due diligence confirms the company meets 8 out of 10 GeoBargain criteria.  However, the company does not meet the minimum 30% earnings per share (EPS) growth threshold. 

Given that it beat analyst estimates, the GeoTeam® will need to access the company's outlook to determine if it can achieve 30% EPS growth, .  We will also monitor any changes in analyst estimates.  If it becomes apparent that 30% EPS growth is currently unachievable we will re-code the stock as a GeoSpecial based on its low tax adjusted PEG Ratio (~.55).

Today the company announced strong first quarter fiscal 2010 financial results. The company easily exceeded analyst estimates giving the GeoTeam® confidence that China-Biotics may be able to achieve a minimum of 30% earnings per share growth rate for the coming year.  Before today, analyst estimates also echoed this sentiment indicating earnings per share growing of over 30% to $1.30.

See the GeoTeam®  updated valuation scenarios.

China-Biotics year end press release is now available.  In the The GeoTeam's® previous note we mentioned that it appeared that fourth quarter earnings per share growth was negative. However, the press release has shed further light on the situation and highlights that fourth quarter earnings per share, on a non-GAAP basis, was actually up 22.2% to $0.32.

Company comments also are encouraging:

"With the ramp-up of our new facility this year, we will be able to accept larger purchase orders from major dairy producers and animal feed manufacturers, which remain the most prominent sources of demand for bulk additives," Mr. Song said. "Same-store sales for Shining retail stores that have been in operation at least one year are expected to grow significantly year-over-year, and we hope to continue to expand the number of Shining retail outlets during the year. Although global economic growth remains suppressed, we believe there is pent-up demand for our bulk additive products, which should generate substantial growth in revenues and net income during the 2010 fiscal year.

The GeoTeam® will participate in the China-Biotics conference call this morning at 10:00 am EST.  The The GeoTeam® is still awaiting revisions to 2010 analyst estimates.  We will provide details if warranted. 

China-Biotics ($10.00) is currently coded a as a GeoBargain on the Radar stock.  The company just filed its 2009 10K which at first glance shows non-GAAP earnings per share coming in at $1.00.  Analyst estimates were $0.83  No press release has been issued yet. However, due to the company's apparent strong 2009 financial results, we are taking a chance and now coding the stock as a GeoBargain.  More details will be provided upon further due diligence.

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($10.55) Further due diligence confirms the company meets 8 out of 10 Geobargain criteria.  However, the company does not meet the minimum 30% earnings per share (EPS) growth threshold. 

• Non-GAAAP 2009 EPS growth was approximately 20%
• It appears that fourth quarter EPS growth was negative.
• Fiscal 2010 eps growth is currently projected to be about 17%.

Given that it beat analyst estimates, the GeoTeam® will need to access the company's outlook to determine if it can achieve 30% eps growth, .  We will also monitor any changes in analyst estimates.  If it becomes apparent that 30% eps growth is currently unachievable we will re-code the stock as a GeoSpecial based on its low tax adjusted PEG Ratio (~.55).