China Automotive Systems Q2 08 Results

By: ispeculatornew
Date posted: 08.17.2008 (2:04 pm) | Write a Comment  (4 Comments)

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CAAS – China Automotive Systems (NASDAQ) – (Closing Price on Friday 8/15/08 – $6.03)

China Automotive Systems announced second quarter results on August 12 and reported sound results.

The company came in with revenue of 46.51 million and diluted EPS of 0.18. Revenue improved 28% year over year and 12% sequentially. Diluted EPS improved 80% year over year and was flat sequentially.

China Automotive Systems had given preliminary results in June for revenue over 52 million and EPS between 0.18 and 0.22. While the company met the low end of their EPS guidance they came in well below their revenue guidance. An analyst asked about this shortfall in the conference call. The company responded that when they gave guidance they were only two months into the quarter and there was a slowdown in the final month. They also stated that a related party transaction between the company’s subsidiaries had an impact on results.

The same analyst also asked how things looked for the next quarter. The company responded that they expect slower growth in the third quarter for a few reasons. First, the company stated that new emissions standards that took effect in July and higher gasoline prices are going to cause consumer hesitation for a couple of months. Second, the company stated the Olympics is going to have an impact because steel plants have been forced to shut down due to pollution. This has caused a temporary increase in steel prices and both car manufacturers and car parts manufacturers have intentionally delayed production to avoid high prices. Also, the company said the summer is seasonally slower than other parts of the year.

The company did say that it still expects year over year growth in Q3, but not at the same rate as in Q1 and Q2. The company also said that the fourth quarter should be a strong quarter.

Even though China Automotive Systems reported a very good quarter in Q2 the stock price has sold off a little due to the anticipated slowdown in Q3. However, I think China Automotive Systems is a good stock to hold long term and I see no reason to sell a growing company at such a cheap valuation. I would continue to hold your shares.

Disclosure: I do not have a position in CAAS.

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4 Comments

  1. Comment by Amit — August 19, 2008 @ 3:29 am

    And what is your advise to those who dont have any position in CAAS? Should they be buying it? Like I dont have any and was thinking of buying especially after yesterday’s fall.

    Amit

  2. Comment by admin — August 19, 2008 @ 6:54 pm

    Amit,

    I think CAAS still presents a good buying opportunity but it will probably trade sideways for a few months. I think it is a good long term buy though.

  3. Comment by Amit — August 20, 2008 @ 2:38 am

    Yeah, I am looking at it from a long term perspective. I am still waiting for it to go at least below $5. And I remember you telling you would write a blog about how to select stocks etc which is basically written keeping new and small time investors in mind. So, I was thinking I might want to send you a questionnaire, like the questions I still have/had in my mind. I dont want to probably write it here. Do you have an email or something where I can write to?

    Thanks
    Amit

  4. Comment by admin — August 20, 2008 @ 10:53 pm

    You can contact me through either of the emails on the contact link on the top left of my blog. Here is a link to that page:

    http://www.intelligentspeculator.net/contact-information/

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