HONG KONG (XFN-ASIA) - JP Morgan raised target price for China Yurun Food Group to 16.9 hkd from 15.9 while maintaining an "overweight" rating on the mainland meat producer, citing higher earnings estimates.

The US house revised up its 2008 to 2010 net earnings forecast by 23 pct, 19 pct and 27 pct, respectively, to 1.18 bln, 1.60 bln and 2.29 bln hkd.

"We revise our expectations of live hog and pork price trends in China in 2008 from a decrease to an increase. Nonetheless, this will only increase China Yurun's top-line growth without hurting margins," it said.

"We now look for a net profit growth of 39 pct over the period between 2008 and 2010," the brokerage said.

JP Morgan noted China Yurun's 2007 net profit grew 79 pct to 859 mln hkd, 15 pct and 23 pct higher than its estimate and market consensus, respectively.

Excluding a one-time gain, recurrent net profit still grew 69.4 pct, it said.

"We believe this good set of results reflects China Yurun's strong pricing power and impressive execution capabilities, which helped it ensure the supply of live hogs/pork in the context of a live hog shortage in China in 2007," JP Morgan said.

Given stable pork prices in the first half of this year and the likely decreasing trend in the second half, "we believe China Yurun will see its margin improve in the chilled pork business", it said.

Moreover, the increase in live hog supply will likely prompt a higher capacity utilization rate for upstream operations, it added.

Shares of China Yurun traded up 0.42 hkd or 4.17 pct to close the day at 10.5.

( 1 usd = 7.8 hkd)

george.ng@xfn.com