NEW YORK, NY / ACCESSWIRE / August 8, 2018 / SeeThruEquity, a leading independent equity research and corporate access firm focused on smallcap and microcap public companies, today announced that it has issued an update on Shineco, Inc. (NASDAQ: TYHT).
The note is available here: TYHT August 2018 Update Note.
Based in Beijing, China, Shineco, Inc. (NASDAQ CM: TYHT, ''Shineco'') produces and distributes herbal medicines, organic agricultural products, specialized textiles, and other plant-based health and well-being products. We initiated coverage of Shineco on November 9, 2017, and are updating coverage following recent results led by the company's growth in the industrial processing of Apocynum Venetum, an indigenous plant grown in the Xinjiang region of China known in Chinese as ''Luobuma'' or ''bluish dogbane.'' Our target is $7.50, which reflects a fair P/E multiple 12.3x estimated FY2018E EPS of $0.61 per share.
Highlights from the note:
Shineco exhibiting strong growth in FY2018 on luobuma sales
Shineco entered FY2018 issuing guidance for 30% topline growth, driven by luobuma sales enabled by new processing at Apocynum Industrial Park in Xinjiang. Shineco appears to be executing on this plan, as the company's revenues through the first nine months of FY2018 reached $35.3mn - reflecting top-line growth of 38.2%. Sales growth has been driven by luobuma, demonstrating execution to plan by management - luobuma sales increased from 2.8mn in the first nine months of FY2017 to 10.4mn in the first nine months of FY2018. Similarly, EPS has increased by 50% through the first nine months of FY2018, reaching $0.45 versus $0.30 in the comparable year-ago period. The company would need to report $0.16 per share in FY4Q18 to reach our estimate of $0.61.
Growth initiatives include further luobuma projects, blockchain initiatives
Looking ahead to FY2019, Shineco expects growth to come from Luobuma as well as new technology initiatives, including growing online sales and a new blockchain initiative. The company announced a $51mn annual contract for luobuma with Horgos Huajing Tencel Technology Development Co., Ltd. In December, which would represent demand of up to 20,000 tons of apocynum leather fabric by the end of December 2018. Given annual revenues of $45mn expected for FY2018E (ended June 2018), the deal has transformative potential to add scale and revenues for Shineco.
Also in the luobuma space, Shineco announced on July 2, 2018, that it had established the Apocynum Industrial Integration Construction Project in Bayingolin Mongol Autonomous Prefecture, which is operated by the company's joint venture company, Xinjiang Shineco Taihe Agriculture Technology Ltd. As part of the project the company plans to build 280 greenhouse nursery bases, five modern farms, five mechanical peeling hemp factories, five environmental protection building materials factories, and five theme villages, over 3 years. When completed, CEO Yuying Zhang stated that Shineco's annual output goals for apocynum fabric, apocynum tea, building materials and apocynum honey will be 300,000 tons, 20,000 tons, 300,000 cubic meters and 100,000 kilograms respectively.
On July 9, 2018, Shineco also announced a technology initiative that would allow it to enter the blockchain space. Shineco stated that it had made a strategic investment of $1.5mn in Hash Bank, an integrated cryptocurrency financial services platform. We are intrigued to learn more about Shineco's plans in the blockchain space, however, the announcement suggested that management will also seek to introduce blockchain technology into the apocynum industry chain.
$7.50 price target for Shineco
Our target for Shineco is $7.50, which reflects a fair P/E multiple 12.3x estimated FY2018E EPS of $0.61 per share. We note that as of July 26, 2018, shares appear to offer deep value, trading at 3.2x 2017 EPS and a large discount to working capital of $2.39 per share.
Please review important disclosures in the report and on our website at www.seethruequity.com.
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. For more information about the Company, please visit 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 approach to deliver equity research of microcap and smallcap companies. SeeThruEquity has also been the host of acclaimed investor conferences that are the ultimate event for publicly traded companies with market capitalizations less than $1 billion since 2012.
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