Wednesday, February 23, 2011

Lihua Provides Strong Preliminary Numbers

Lihua International (LIWA) provided preliminary unaudited numbers yesterday that exceeded previous 2010 guidance. They also introduced 2011 guidance that basically met analyst estimates and provided for 30-35% earnings growth. Strip out cash and the stock trades for roughly 4x 2011 estimates.

LIWA is leading Chinese developer, designer, and manufacturer of low cost, high quality alternatives to pure copper products, including refined copper products and superfine and magnet wire.

Basically LIWA is in the sweet spot of the Chinese copper demand machine. Unfortunately though the market just doesn't respect the numbers they report. A few short sellers have done a good job in trying to scare the market though they don't appear credible.

The stock remains a attractive pick of the Opportunistic models.

2010 Preliminary results


  • Company expects revenue of $370.5 million, representing growth of 129% over $161.5 million in 2009.
  • Full-year gross profit is expected to be approximately $62.1 million, an increase of 71% over $36.2 million in 2009. Lihua's preliminary gross profit exceeds the Company's previous guidance of $57.0 - $60.0 million.
  • Non-GAAP net income for the year is expected to be $40.0 million, compared with $25.6 million in 2009.



2011 Guidance


  • Lihua is targeting 2011 gross profit of $80.0 million to $82.0 million and non-GAAP net income of $52.0 million to $54.0 million, representing year-over-year growth of 29 - 32% and 30 - 35%, respectively. The Company expects that 2011 growth will be driven by the introduction of Lihua's copper recycling facility in the second half of 2011 with continued strong demand in China for recycled copper and copper alternatives in the household appliance, consumer white goods and infrastructure markets. The new copper recycling facility will initially house two new smelters.  Once online, the new smelters will effectively double Lihua's scrap copper refinery capacity to 100,000 tons annually.



Disclosure: Long LIWA. Please see disclaimer on info provided on this blog. 

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