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Neutral on Wonder Auto Tech
Wonder Auto Technology (WATG - Analyst Report), is a beneficiary of a high market share in alternator and starter production in China, along with strategic positioning in the faster growing sub-segments in these markets. Wonder Auto Technology announced that its subsidiary, Jinzhou Electrical Equipment Co. Ltd., has entered into a four year supply agreement and received supply orders for its starters and alternate products from a major North American OEM automotive manufacturer.
Shipments are expected begin in June 2009 and continue through June 2013. The contract is valued in excess of $13.5 million. On February 5, 2008, Wonder Auto Technology reported fourth quarter and full year 2007 results.
In the fourth quarter, earnings per share were $0.17. Net income was $4.3 million, reflecting an increase of 81.6% to $2.4 million. Net margin was 14.5%. Total revenues increased 55.4% to $29.7 million.
Currently, Wonder Auto is valued at 10.1x our 2008 earnings of $0.81. However, weak product pricing, high customer concentration, and an unusually low tax rate force us to rate the stock a Hold with a target of $8.50. This is 10.5x our 2008 earnings estimate.
Read the full analyst report on WATG.
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