J.P. Morgan raised the Bishengyuan (0926.HK) rating from neutral to an increase in holdings on the grounds of improved fundamentals and attractive valuations.

The bank pointed out that Bishengyuan's current price is equivalent to 12 times its price-earnings ratio in 2011 (33% lower than international peers), and believes that shares are undervalued. The bank believes that Bishengyuan's detox tea sales will continue to be strong, while diet tea sales will resume growth in the second quarter.

The bank raised Bishengyuan's 2011 sales forecast by 10% and earnings per share forecast by 9%, but lowered its target price from HK$3.60 to HK$3.20 because it made more conservative predictions about the products the company will launch.

Bishengyuan closed the full day at HK$2.55.