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China Precision Steel, Inc. (CPSL) Releases Strong Preliminary Fiscal Year 2008 Results

China Precision Steel, Inc. (CPSL), a cold-rolled steel processing company in China, reported preliminary fiscal year 2008 financial results this afternoon after the close. The company expects to achieve $87.7 million in sales, an increase of 62.6% year-over-year from $54.0 million. Analysts expected 2008 revenues of $75.4 million. China Precision Steel expects gross profit for 2008 to be $22.5 million, an improvement of 49.6% from $15.0 million in 2007. Fourth quarter revenue is expected to be approximately $28.5 million, an increase of 70% year-over-year from $16.8 million.

“Our record results for the full year are attributable to an increase in orders from our current customers, as well as the addition of new customers, the majority of whom came to us as a result of increasing media coverage of the Company’s high quality, specialty steel production,” said Dr. Wo Hing Li, China Precision Steel’s Chairman and CEO. “Currently, the utilization rate at our second cold-rolling mill is at 55-60% capacity, and continues to ramp to full capacity. Moreover, our production facilities are fully occupied with up to three months of advanced bookings. Our new revenue stream from stainless steel subcontracting projects increased as a percent of total revenue and we expect it to continue growing in the future.”

The company will host a conference call on Tuesday morning, September 16, to discuss official year-end results. Shares of CPSL closed at $4.96 today after rising 14% in anticipation of today’s announcement. CPSL traded as high as $5.40 after hours before settling down to a bid of $5.00. The stock has traded in a 52-week range of $3.25 – $12.65. CPSL has a market cap of $228 million, a P/S of 2.6, and a P/E of 15.

An analog to CPSL is Sutor Technology Group (SUTR), a Chinese manufacturer of steel-finishing fabrication products and hot-dip galvanized steel. SUTR closed at $4.02 today and has traded in a 52-week range of $3.00 – $9.42. SUTR is cheaper than CPSL on many metrics. SUTR has trailing twelve-month sales of $405 million, a market cap of $152 million, a P/S of 0.38, and a P/E of 5.0. SUTR is set up as an interesting trade here, as the company is due to report fourth quarter and full-year earnings any day within the next week.

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