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Putting The Brakes On SORL Auto Parts
SORL Auto Parts (Nasdaq:SORL) is a leading manufacturer and distributor of automotive brake systems in China. The company reported third-quarter EPS of 25 cents a share, up 28% year-over-year. Net sales were up 40% year-over to $48 million. The company classifies its sales in three categories - OEM, domestic and exports. While all three categories showed sales growth in the quarter, export sales boomed by over 70% year over year.
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Stop or Go
From a quick observation, SORL looks like a Chinese company with quality attributes. The company claims to have the best market share in China for commercial brake systems. It's also one of the top 100 auto component suppliers in China. The company's export business has divisions in Australia, the UAE, India and the U.S. Shares trade for $9, implying a P/E ratio of under 10 if you annualize nine month EPS figure of 70 cents. In the U.S., the auto parts industry is doing very well. Big and small, companies are experiencing solid results. Autozone (NYSE:AZO) and O'Reilly (Nasdaq:ORLY), two of the largest three auto parts retailers, are raking in record profits quarter after quarter. On the small cap, Motorcar Parts of America (Nasdaq:MPAA) is also experiencing a favorable environment.
China Vs the U.S.
China's growth continues to be a puzzle for many investors. Some are waiting for the shoe to drop in China while others are convinced that the growth story will remain. SORL currently sports a market cap of $175 million and looks very attractive, given the company's growth rate and valuation. However, there is always a cloud of uncertainty that hangs over Chinese-based companies with regard to their growth and profitability.
The Bottom Line
Overall, SORL Auto Parts has a lot of favorable attributes - mainly the exposure to India, the Middle East and the United States, in addition to its homeland in China. If management can deliver value from the recent acquisitions, this is a company worth watching.
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IN PICTURES: 7 Ways To Position Yourself For Recovery
Stop or Go
From a quick observation, SORL looks like a Chinese company with quality attributes. The company claims to have the best market share in China for commercial brake systems. It's also one of the top 100 auto component suppliers in China. The company's export business has divisions in Australia, the UAE, India and the U.S. Shares trade for $9, implying a P/E ratio of under 10 if you annualize nine month EPS figure of 70 cents. In the U.S., the auto parts industry is doing very well. Big and small, companies are experiencing solid results. Autozone (NYSE:AZO) and O'Reilly (Nasdaq:ORLY), two of the largest three auto parts retailers, are raking in record profits quarter after quarter. On the small cap, Motorcar Parts of America (Nasdaq:MPAA) is also experiencing a favorable environment.
China's growth continues to be a puzzle for many investors. Some are waiting for the shoe to drop in China while others are convinced that the growth story will remain. SORL currently sports a market cap of $175 million and looks very attractive, given the company's growth rate and valuation. However, there is always a cloud of uncertainty that hangs over Chinese-based companies with regard to their growth and profitability.
The Bottom Line
Overall, SORL Auto Parts has a lot of favorable attributes - mainly the exposure to India, the Middle East and the United States, in addition to its homeland in China. If management can deliver value from the recent acquisitions, this is a company worth watching.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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