Thoughts on China Angel profit guidance

I read the recent China Angel profit guidance document with interest. The following points were quoted:

Following the preliminary assessment, group expect a net loss in 2Q2008 compared to profit in the same period last year. With their expansion plan, higher operating overhead and operating cost is incurred. There is rising raw material and labour cost.

It looks like the inflation has indeed taken its toll on the consumer company. The rising raw material and labour cost is eroding the profit margin. There is a limit to how fast the company can raise the selling price, especially in a very competitive environment.

Then, what should those people with China consumer stock do? Do nothing. We know the cost is rising, that's why the stocks were battered down. But, I don't expect further escalation of cost. I feel we already reach the peak of current cycle. So, the cost should at least come down in the next year or so. Selling at this juncture won't be a wise decision. We are waiting for the rebound now.