Synear - still a buy

Synear just announced the 3rd quarter result which comes below expectation. The key point is unexpected quick fall of the margin. Given that it just experienced the margin expansion during last period, this big fall comes as a surprise to me. However, this is understandable, since the raw material price has increased a lot during this period. With the pork price expected to stabilize, the pressure might ease for the next quarter.

They are spending a lot on the promotion and advertising, ahead of Olympics. This could yield a long term gain for the company. At the same time, an aggressive production capacity expansion plan has been put in place. They have also implemented some cost control and moving towards higher margin product. Analyst is forecasting a forward PE of 21.

Given the company is one of the top brand in China and well defined expansion plan. I would still think it is a buy. It might be a better time to buy during a minor set back, then chase it when it is going through the roof.