China Automotive Systems Inc. (NASDAQ: CAAS)
China Automotive Systems Inc. (CAAS), through its interests in Sino-foreign joint ventures, engages in the manufacture and sale of automotive systems and components for the automobile industry in the People’s Republic of China. The Company offers automotive parts, power steering gears, automotive steering gears, steering pumps, sensor modular and electric power steering. It also offers integral power steering gear and pinion power steering gear for light and heavy-duty vehicles and cars.
The Company currently owns two trademarks covering automobile parts and 12 Chinese patents covering power steering technology. The Company is in the process of integrating new advanced technologies such as electronic chips in power steering systems into its current production line and is pursuing aggressive strategies in technology to maintain a competitive edge within the automobile industry.
CAAS was founded in 2003 and is headquartered in Jing Zhou City, the People’s Republic of China.
|
Share Statistics (18-Nov-09) |
|
FY 2007 |
FY 2008 |
% Chg |
Q3 2008 |
Q3 2009 |
% Chg |
|
| Symbol |
CAAS |
Revenue, $Mn |
134.2 |
163.9 |
22.1% |
36.9 |
64.7 |
75.0% |
| Current price |
$16.80 |
Gross marg. |
33.8% |
28.9% |
-490 b.p. |
26.7% |
27.3% |
60 b.p. |
| 52wk Range: |
$2.01-7.62 |
Oper. margin |
15.9% |
10.3% |
-560 b.p. |
10.0% |
15.08% |
500 b.p. |
| Avg Vol (3m): | 260,647 | Net margin |
6.6% |
7.6% |
100 b.p. |
7.6% |
13.3% |
570 b.p. |
| Market Cap. |
453.3M |
|
|
|
|
|
|
|
| Dil. Shares Outst. |
26.98M |
EPS, $ |
0.37 |
0.46 |
24.3% |
0.09 |
0.28 |
211.1% |
Source: Reuters.com, SEC Filings.
Financial Summary
The Company’s net sales were $64.7 million for the three months ended September 30, 2009, as compared to $36.9 for the three months ended September 30, 2008, an increase of $27.7 million or 75.0%. Gross profit in the third quarter of 2009 was $17.6 million, an increase of $7.7 million compared with $9.9 million for the same quarter in 2008, reflecting a 78.6% year-over-year increase. The gross margin in the third quarter of 2009 was 27.3%, compared with 26.7% in the third quarter last year. Net income attributable to common shareholders was $8.6 million for the third quarter, or $0.28 per diluted share, compared with $2.8 million, or $0.09 per diluted share in the same quarter in 2008.
As of September 30, 2009, total cash and cash equivalents were $45.9 million, as compared with $37.1 million as of December 31, 2008. Stockholder’s equity increased to $123.7 million as of September 30, 2009, from $104.5 million as of December 31, 2008. Working capital reached $87.5 million. Net cash flow from operations was $24.3 million for the nine months ended September 30, 2009. During the third quarter of 2009, CAPEX was $2.5 million and free cash flow increased by $6.1 million as the Company purchased equipment to enhance its production capacity. As a result, total free cash flow was $15.5 million in the first nine months in 2009.
CAAS announced that it expects its revenue to increase by approximately 40% for the year 2009. According to Reuters Estimates, analysts are expecting the Company to revenues of $218.9 million for fiscal 2009 and $255.5 million for fiscal 2010.
|
|
# of Estimates |
Mean |
High |
Low |
1 Year |
|
SALES (in millions) |
|||||
|
Quarter Ending Dec-09 |
2 |
54.27 |
56.40 |
52.14 |
64.80 |
|
Quarter Ending Mar-10 |
2 |
55.07 |
57.24 |
52.90 |
– |
|
Year Ending Dec-09 |
2 |
218.85 |
228.20 |
209.50 |
224.40 |
|
Year Ending Dec-10 |
2 |
255.47 |
272.00 |
238.94 |
– |
|
Earnings (per share) |
|||||
|
Quarter Ending Dec-09 |
2 |
0.14 |
0.15 |
0.14 |
0.23 |
|
Quarter Ending Mar-10 |
2 |
0.16 |
0.16 |
0.16 |
– |
|
Year Ending Dec-09 |
2 |
0.63 |
0.70 |
0.57 |
0.73 |
|
Year Ending Dec-10 |
2 |
0.81 |
0.95 |
0.67 |
– |
Source: Yahoo! Finance, SEC Filings.
Analyst Consensus
Analysts polled by Thomson Reuters recommend the “Buy” strategy for CAAS.
|
Analyst Detail |
Buy |
Outperform |
Hold |
Underperform |
Sell |
No Opinion |
|
Latest |
1 |
1 |
0 |
0 |
0 |
0 |
|
4 weeks ago |
1 |
0 |
0 |
0 |
0 |
0 |
|
2 months ago |
0 |
0 |
1 |
0 |
0 |
0 |
|
3 months ago |
0 |
0 |
1 |
0 |
0 |
0 |
|
Last year |
1 |
0 |
0 |
0 |
0 |
0 |
Source: http://markets.ft.com/tearsheets/analysis.asp?s=caas
Investment Highlights
CAAS is a holding company and has no significant business operations or assets other than its interest in Great Genesis Holdings Ltd. Through Genesis, the Company manufactures power steering systems and other component parts for automobiles. All operations are conducted through eight Sino-foreign joint ventures in China and a wholly owned subsidiary in the United States – Henglong USA Corporation which mainly engages in marketing of automotive parts in North America, and provides after sales service and research and development support accordingly.
The Company has business relations with more than 60 vehicle manufacturers, including FAW Group and Dongfeng Auto Group, two of the five largest automobile manufacturers in China; Shenyang Brilliance Jinbei Co., Ltd., the largest minivan manufacturer in China; Cherry Automobile Co. Ltd, the largest state owned car manufacturer in China, and Zhejiang Geely Automobile Co., Ltd., the largest private owned car manufacturer. In 2007 and 2008, CAAS has supplied power steering pumps and power steering gears for the Sino-Foreign joint ventures established by General Motors and Volkswagen.
Sales of the Company’s steering gears for passenger vehicles in the 2009 third quarter were $43.8 million, reflecting a 77.8% increase from $24.6 million in the same quarter one year ago. Pump sales for domestic passenger vehicles in the 2009 third quarter were $6.2 million, an increase of 79.2% from $3.4 million in the same quarter last year. Commercial vehicle steering gear and accessories sales were $14.6 million, representing an increase of 66.0% compared with $8.8 million for the same period of 2008. In 2008, CAAS sold approximately 1.3 million systems and components compared with 1.1 million in 2007.
The Company has a 10-year consulting and licensing agreement with Bishop Steering Technology Ltd, one of the leading design firms in power steering systems. Bishop’s technology in power steering systems is currently used by carmakers such as BMW and Mercedes Benz. The Company owns a Hubei Provincial-Level Technical Center, which is approved by the Hubei Economic Commission. The center has a staff of 140, including 12 senior engineers, two foreign experts and 85 engineers, primarily focused on steering system R&D, tests, production process improvement and new material and production methodology application. In addition, the Company has partnered with Tsinghua University to establish a steering system research center, called Tsinghua Henglong Automobile Steering Research Institute, for the purposes of R&D and experimentation for Electronic Power Steering and Electronic Hydraulic Steering Systems.
As of 2008, only 1/50 Chinese owned a car. Car ownership grew 300% during the period of 2002 – 2008. In October, China’s production of automobiles since the beginning of this year hit 10 million units today, making it the third country in the world, after United States and Japan, to surpass the annual output mark of this level. China’s auto sales should soar to 12.6 million units this year, up 35% from 2008, boosted by subsidies that the industry is lobbying Beijing to extend, a government researcher said recently. The increasing wealth of the Chinese consumers will continue to drive consumer sector growth in the long run, however uncertainty of possible repercussion from further financial fallout remains in the near term. To bolster auto demand in China, the government implemented a series of stimulus measures in the early 2009.
Technical Analysis
Source: http://stockcharts.com/h-sc/ui?s=PLA
CAAS is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.
The MACD for the Company currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.
CAAS’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, CAAS is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.
Comparative Analysis
|
Company Name |
Ticker |
Price per |
Mrkt. Cap. |
P/E |
P/S |
||
|
Nov-18-2009 |
symbol |
Share, $ |
$ Mn |
2009 |
2010 |
2009 |
2010 |
|
Tenneco Inc. |
TEN |
15.94 |
755.5 |
n/m |
17.91 |
0.16 |
0.14 |
|
Sorl Auto Parts Inc. |
SORL |
6.76 |
123.2 |
11.27 |
9.39 |
1.03 |
0.82 |
|
ArvinMeritor Inc. |
ARM |
8.91 |
659.3 |
28.74 |
5.75 |
0.15 |
0.14 |
|
Dana Holding Corp. |
DAN |
7.20 |
721 |
n/m |
28.80 |
0.14 |
0.11 |
|
TRW Automotive Holdings Corp. |
TRW |
23.15 |
2,720.0 |
60.92 |
13.54 |
0.24 |
0.22 |
|
Wonder Auto Technology Inc. |
WATG |
11.39 |
307.1 |
13.56 |
11.28 |
1.47 |
1.20 |
|
|
|
|
|
|
|
|
|
|
Median |
|
|
|
28.74 |
13.54 |
0.16 |
0.14 |
|
|
|
|
|
|
|
|
|
|
China Automotive Systems Inc. |
CAAS |
16.80 |
138.9 |
26.67 |
20.74 |
0.63 |
0.54 |
Source: Thomson Financial
Insider Trading Activity
|
NET SHARES PURCHSE ACTIVITY Inside Purchases – Last 6 Months |
||
|
Shares |
Transaction |
|
| Purchases |
n/a |
0 |
| Sales |
306,722 |
6 |
| Net Shares Purchased (Sold) |
(306.722) |
6 |
| Total Insider Shares Held |
19.36M |
n/a |
| % Net Shares Purchased (Sold) |
(1.6%) |
n/a |
|
Net Institutional Purchases — Prior Qtr to Latest Qtr |
|
|
Shares |
|
| Net Shares Purchased (Sold) |
425,826 |
| % Change in Institutional Shares Held |
19.5% |
Source: Yahoo Finance
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