SGTI Shengtai Pharmaceutical Inc (GM)

Dutton Associates initiates coverage of Shengtai Pharmaceutical (OTCBB: SGTI) with a strong Speculative Buy rating and a price target of $5.11. The 24-page report by Dutton senior analyst Stanley Ng is available at www.duttonassociates.com as well as from First Call, Bloomberg Professional, Capital IQ, FactSet, Zacks, Reuters, Knobias, and other leading financial portals. We are initiating coverage on Shengtai Pharmaceutical with a Strong Speculative Buy rating and a 12-month price target of $5.11 per share. Shengtai is principally engaged in the development, production, and distribution of pharmaceutical grade glucose in the PRC. Pharmaceutical grade glucose is the raw material for pharmaceutical manufacturers to add specific formulations to produce medicated transfusion that is one of the most commonly used clinical prescriptions in hospitals and heath care institutions and a well-accepted treatment routine for many ailments. Shengtai also manufactures glucose and starch products for food and beverage industry for the domestic market. In our view, Shengtai is an attractive play to participate in the prosperous prospects of the huge and rapidly growing PRC healthcare market, especially the fast growing pharmaceutical glucose for transfusion solution market. Shengtai enjoys several distinct advantages over its competitors, such as proximity to raw material supply, a dominate market share of 40% in Dextrose Monohydrate and 25% in Dextrose Anhydrate in China, vertically integrated manufacturing capability and geographical proximity, and cross-cultural similarities to the end markets in Asia. Based on our production capacity expansion and utilization, product pricing and margin assumptions, we forecast Shengtai�s revenue to surge from $51.7 million in FY2007 to $119.5 million in FY2009 and to $149.4 million by 2010. Diluted EPS are estimated at $0.49 for FY2008, $0.65 for FY2009 and $0.82 for FY2010. About Dutton Associates Dutton Associates is one of the largest independent investment research firms in the U.S. Its 30 senior analysts are primarily CFAs, and have expertise in many industries. Dutton Associates provides continuing analyst coverage of over 140 enrolled companies, and its research, estimates, and ratings are carried in all the major databases serving institutions and online investors. The cost of enrollment in our one-year continuing research program is US $35,000 prepaid for 4 Research Reports, typically published quarterly, and requisite Research Notes. The Firm does not accept any equity compensation. We received $35,000 from the Company for 4 quarterly Research Reports with coverage commencing on 8/05/2008. Our principals and analysts are prohibited from owning or trading in securities of covered companies. The views expressed in this research report accurately reflect the analyst's personal views about the subject securities or issuer. Neither the analyst's compensation nor the compensation received by us is in any way related to the specific ratings or views contained in this research report or note. Please read full disclosures and analyst background at www.jmdutton.com before investing.