Targeted Strategies for Today's Evolving Markets

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StockEgg Featured Company: China Precision Steel Inc. (CPSL) Looking West toward Nigerian Export Market

Some intermediate markets are the basis for all consumer goods. Without these markets, the products we use and take for granted every day just wouldn’t get made. Finding the manufacturers that produce these intermediate materials is a solid way to quietly succeed where others may not have thought to tread.

China Precision Steel Inc., a provider of ultra-thin, cold-rolled steel products, works to serve many non-typical steel end-use markets. Where many may conjure up visions of tall buildings and ships when they think of steel related products, China Precision Steel thinks: automotive, sewing needles, saw blades and packaging. The company primarily sells into its domestic market but is quickly increasing its export sales efforts to South Asia and most recently Nigeria.

The company is quietly placing itself into markets that are poised to expand significantly. In emerging nations, the new middle class is quickly becoming accustomed to what a Western consumer might call a necessity. Clothes and dishwashers are/will become a standard convenience in many “middle-class” homes, necessitating thin, cold-rolled steel for their manufacture. The automotive marketplace in China is already beginning to grow at increased rates, which translates nicely into profits for 1st tier suppliers and their vendors. In either example, the company has a solid base in supplying smaller, end-product materials for manufacture.

The company is clearly ready for the expansion of its primary markets. Its current capacity is operating at high rates with its overall operating capacity not expected to be online for approximately 2 years. This capacity expansion has occurred from the start-up of a new 170mm facility which is working its way up to 100% operating capacity. The new facility is currently operating at 50% capacity.

With this capacity in mind, it is a positive event that the company saw first quarter sales drop only slightly because high-end carbon orders did not materialize as expected. Generally, this would indicate that the company has a solid product line that depends upon no one single category to keep the company operating smoothly and profitably. China Precision Steel is clearly on a roll and currently aiming at expansion abroad and domestically.

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