NEW YORK, NY / ACCESSWIRE / November 8, 2017 / SeeThruEquity, a leading independent equity research and corporate access firm focused on small-cap and micro-cap public companies, today announced it has initiated coverage on Shineco, Inc. (NASDAQ: TYHT) with a 12-month price target of US $7.50.
The report is available here: TYHT Initiation Report.
We initiate coverage of Shineco, Inc. (NASDAQ CM: TYHT)("Shineco") with a price target of $7.50. Based in Beijing, China, Shineco produces and distributes herbal medicines, organic agricultural products, specialized textiles, and other plant-based health and well-being products. Shineco completed its initial public offering on the NASDAQ Capital Markets on September 28, 2016, raising $7.7mn in gross proceeds at an offering price of $4.50 per share. Over its last fiscal year, Shineco has turned in strong results, generating $33.6mn in revenue and EPS of $0.41. Results were largely the results of sales of Traditional Chinese Medicine ("TCM") herbs and medicines, and agricultural products, such as yew trees. Looking toward FY2018, however, Shineco expects growth to accelerate due to a new method of processing Luobuma, which should support 30%+ growth in 2018, according to management.
Highlights from the report are as follows:
New Luobuma processing technology to drive growth in FY2018
Shineco's TCM and agricultural businesses appear to be stable revenue sources, each with multiple opportunities for growth. However, the larger growth catalyst appears to come from the company's expansion of its Luobuma operating segment. The segment includes textiles and health supplements derived from Apocynum Venetum, an indigenous plant grown in the Xinjiang region of China known in Chinese as "Luobuma" or "bluish dogbane." Luobuma has traditionally been used in China for a number of medicinal purposes and is also being used for specialized applications in the textile industry, given the combination of its health benefits with softness and breathability comparable to cotton. The Luobuma business is expected to grow rapidly due to a new approach to industrializing the processing of Luobuma, which had traditionally been a labor-intensive and time-consuming process. Shineco announced that it would implement the process in Apocynum Industrial Park in Xinjiang, China, which will enable it to process 100,000 tons of Luobuma by the end of FY18E. This increase in production is expected to be a chief growth driver for Shineco in 2018, enabling the company to generate $45mn in revenue, according to guidance.
Shineco appears to offer attractive valuation, price target is $7.50
We initiate coverage of Shineco with a price target of $7.50. Shineco appears to offer an attractive valuation due to the combination of profitable revenue streams from its Traditional Chinese Medicine (TCM) and green agriculture products, enhanced by significant growth opportunities from a new technology for industrial processing of Apocynum (Luobuma). At the recent price of $4.11, Shineco shares trade at just 10x FY2017 EPS of $0.41, and 13.1x FY18E EPS of $0.61. The company also offers a degree of safety with a strong balance sheet that boasts $23.1mn in cash on hand ($1.10 per share) and debt of just $2.7mn. The $7.50 target suggests a fair value of P/E multiple of 18.3x 2017E EPS of $0.41 and 12.3x 2018E EPS of $0.61, respectively. Upcoming catalysts include guidance for FY2018 revenue growth of 34% and earnings growth of approximately 50%+, driven by increased production and sales of Luobuma (Apocynum).
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About Shineco, Inc.
Incorporated in August 1997 and headquartered in Beijing, China, Shineco, Inc. ("Shineco" or the "Company") is a Delaware holding company that uses its subsidiaries' and variable interest entities' vertically- and horizontally-integrated production, distribution and sales channels to provide health and well-being focused plant-based products in China. Utilizing modern engineering technologies and biotechnologies, Shineco produces, among other products, Chinese herbal medicines, organic agricultural produce and specialized textiles. www.tianyiluobuma.com.
About SeeThruEquity
Since its founding in 2011, SeeThruEquity has been committed to its core mission: providing impactful, high quality research on underfollowed smallcap and microcap equities. SeeThruEquity has pioneered an innovative business model for equity research that is not paid for and is unbiased. SeeThruEquity is the host of acclaimed investor conferences that are the ultimate event for publicly traded companies with market capitalizations less than $1 billion.
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