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    Stock Alert for China Automotive Systems Inc. (CAAS)

    China Automotive Systems Inc. (CAAS), through its interests in Sino-foreign joint ventures, engages in the manufacture and sale of power steering components and systems to the Chinese automotive industry.  The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers four separate series of power steering with an annual production capacity of more than 3.5 million sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers, such as China FAW Group Corp., Dongfeng Auto Group Co. Ltd., BYD Auto Company Ltd, Beiqi Foton Motor Co. Ltd. and Chery Automobile Co. Ltd.

    CAAS was incorporated in June 1999 and is based in Hubei Province, the People’s Republic of China.

    Share Statistics (08-Apr-11) FY

    2008

    FY

    2009

    %

    Chg

    Q3

    2009

    Q3

    2010

    %

    Chg

    Symbol CAAS Revenue, $Mn 163.18 255.60 56.6% 64.65 76.10 17.7%
    Current price $10.79 Gross marg. 29.0% 28.4% -2.1% 24.0% 23.9% 0.4%
    52wk Range: $7.40-$25.15 Oper. margin 14.7% 16.0%
    Avg Vol (3m): 233,603 Net margin 7.6% 9.2% 21.1% 13.2% 10.8% -18.2%
    Market Cap. 292.57M
    Shares Outstanding 27.12M EPS, $ 0.44 0.75 70.5% 0.28 0.27 -3.6%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of CAAS soared on Friday after the power-steering components supplier reported strong preliminary fourth-quarter results, with net sales that came in ahead of analysts’ estimates.  CAAS reported that its preliminary net sales for the fourth quarter increased 20% to $100.5 million from $83.8 million in the previous year. Analysts, on average, expected revenues of $89.98 million for the quarter, according to a poll by Thomson Reuters.

    The Company reported gross profit $19.8 million for the quarter, compared to $18.2 million in the year-ago period, an increase which the CAAS attributed to higher net sales, offset by higher warranty expenses and raw material costs in the quarter.

    Income from operations jumped 113% to $12.3 million for the quarter, compared to $5.8 million year-ago period, which can be attributed higher gross profit, reduced general and administrative expenses, and lower depreciation and selling expenses. Operating margin for the fourth quarter of 2010 was12.2% compared to 6.9% in the fourth quarter of 2009.

    The China-based Company said it continues to expect to complete the restatements of its audited 2009 financial statements and unaudited interim financial statements for the first three quarters of 2010 during the second quarter of 2011. CAAS Chairman Hanlin Chen said the Company made solid progress in addressing the previously announced errors in the accounting treatment for the Company’s convertible notes.

    Last month, CAAS received a letter from the Nasdaq stock market saying the Company was not in compliance with its continued listing requirements due to the delay in filing financial reports with the U.S. Securities and Exchanges Commission.

    Apart from easing accounting concerns, the Company said it expects revenue to continue to grow at about a 20% rate year-over-year in 2011, which implies revenue of $415.1 million.  This would beat analysts’ average estimate of $398.55 million for the year.

    Upon completion of the restatement, CAAS said it will file its 2010 Form 10-K, as well as its amended 2009 Form 10-K and amended Forms 10-Q for the first three quarters of 2010.  Chairman Chen said the accounting issues are non-cash in nature and do not affect the Company’s operations.

    CAAS gained $2.65, or 32.56% Friday, to close at $10.79 per share. About 2.98 million shares have traded hands during the session, versus the 10-day average volume of 360.69K. The stock has been moving within a range of $7.40 – $25.15 over the past 52-weeks. The stock is currently trading above its 50-day moving of $10.00 and below its 200-day moving average $13.57. Market capitalization currently stands at $292.57 million and it has 27.12 million outstanding shares.

    Visit CAAS at www.caasauto.com

    Financial Summary


    Financial Strength (08-Apr-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.18 0.97 0.48 0.67
    Current Ratio (MRQ) 1.39 1.22 0.62 0.99
    LT Debt to Equity (MRQ) 3.22 17.64 16.29 115.03
    Total Debt to Equity (MRQ) 73.22 26.87 29.25 164.37
    Interest Coverage (TTM) 15.53 0.03 0.21 16.86

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among six polled investment analysts. Against the China Automotive Systems Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 2 4 0 0 0 0
    4 weeks ago 2 4 0 0 0 0
    2 months ago 2 4 0 0 0 0
    3 months ago 2 4 0 0 0 0
    Last year 0 1 3 0 0 0

    The seven analysts offering 12-month price targets for CAAS have a median target of 16.00, with a high estimate of 25.00 and a low estimate of 12.00. The median estimate represents a 80.38% increase from the last price of 8.87.

    Source: markets.ft.com

    Consensus Estimates Analysis


    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jun-11 6 98.84 101.50 94.70 92.79
    Quarter Ending Sep-11 6 96.80 101.50 91.50 91.49
    Year Ending Dec-11 8 398.55 412.70 384.36 365.93
    EARNINGS (per share)
    Quarter Ending Jun-11 6 0.31 0.33 0.27 0.29
    Quarter Ending Sep-11 6 0.31 0.34 0.29 0.29
    Year Ending Dec-11 8 1.23 1.30 1.17 1.09
    LT Growth Rate (%) 4 18.45 26.30 12.50 12.50

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=CAAS.OQ

    Technical Analysis

    Source: http://stockcharts.com

    On Thursday last week, CAAS closed above its 20-day moving average. This is generally considered to be an indication of a bullish trend.

    The seven analysts offering 12-month price targets for CAAS have a median target of 16.00, with a high estimate of 25.00 and a low estimate of 12.00. The median estimate represents a 80.38% increase from the last price of 8.87.

    CAAS’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Apr08-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Sorl Auto Parts Inc. SORL 5.75 111.00M 4.83 4.32 0.45 0.39
    Tenneco Inc. TEN 41.33 2.49B 15.48 10.76 0.35 0.30
    Wonder Auto Technology Inc. WATG 5.40 182.84M 4.35 0.41
    TRW Automotive Holdings Corp. TRW 52.96 6.49B 7.96 7.44 0.42 0.39
    Auto Parts Median 12.83 n/a 0.48 n/a
    China Automotive Systems Inc. CAAS 10.79 292.57M 8.84 0.73

    Source: Thomson Financial

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