China Automotive Systems (CAAS), a maker of power steering components for automobiles in China, reported solid first quarter results. Revenues increased 46% year over year to $41.5 million, resulting in a 170% increase in net income to $4.4 million, or 18 cents per diluted share.
Qizhou Wu, Chief Executive Officer of China Automotive Systems, stated, “We are excited to report a strong quarter witnessed by the high sales volume growth in particular from the accelerating sales in the commercial vehicle sector due to the forthcoming nationwide Euro III adoption. We are equally pleased with our strong growth momentum in the passenger vehicle sector, as our brand name, quality and service, and production capacity have been widely recognized by leading sino-foreign joint venture auto OEMs and Chinese national automakers in China. As global purchasing trend is upgrading from low-cost-high-volume to high-quality-high-technology, China Automotive Systems is well positioned for the broad market opportunities in the global market.”
Jie Li, Chief Financial Officer of China Automotive Systems, said, ”During the first quarter, we experienced high cost especially with our steering products for commercial vehicles, mainly due to price appreciation in our raw materials, particularly steel. We have successfully negotiated with our customers to raise our average selling price accordingly in the second quarter. We strive to maintain our high gross margin among our auto part peers as we continue to position China Automotive Systems as a high-technology and high-quality supplier to ensure safety measures for millions of vehicles on the roads of China.’
”Our acquisition of Jingzhou Henglong Automotive Parts Co. was successfully completed and financials were consolidated smoothly as we planned in 2007. Our efforts in expense control and economies-of-scale management continue to propel a stronger growth in the operating line. We are now fully reflecting our robust top line growth in our bottom line,” Mr. Li concluded.
Shares of CAAS closed at $5.48 yesterday and have traded in a range of $4.40 – $10.47 in the past year. With 24 million shares outstanding, CAAS has a market cap of $131 million, a P/E of 11.4 and a price-to-sales ratio of 0.89.
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