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RINO International Limited

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RINO International Corporation is another cheap Chinese company, trading at just 6.3x forward estimates.

RINO Internatonal manufactures and installs environmental protection equipment for the iron and steel industry in China.

Headquartered in China, it operates through several subsidiaries which design and service wastewater treatment, flue gas desulphurization equipment and high temperature anti-oxidation systems.

All of these systems are for the purpose of reducing industrial pollution or improving energy utilization.

RINO International Beat By 29% in the Second Quarter as Revenue Surged

The Chinese government is rapidly tightening industrial regulations after several recent environmental disasters which polluted major rivers.

On Aug 16, RINO announced its second quarter results which saw revenue jump 61% to $65.4 million compared to 2009.

Earnings per share were 54 cents which easily beat the Zacks Consensus Estimates by 12 cents. The company has surprised on the Zacks Consensus 3 out of the last 4 quarters.

The revenue increase was due to growth in its core flue gas desulphurization and waste water treatment systems which are its two main business segments. Desulphurization sales were up 41% from a year ago.

Cost of sales, however, surged 59.3% to $42.3 million from $26.6 million in the second quarter of 2009.

The backlog at the end of the second quarter was $104.7 million. RINO expects about 50% of that backlog to be recognized as revenue in the third quarter.

Desulphurization makes up $70.8 million of the total amount but there is also a big backlog for municipal sludge treatment which stands at $18.9 million.

Going forward, RINO expects to expand its municipal sludge treatment business.

Outlook for Fiscal 2010

RINO has kept its revenue projections consistent. It now expects revenues for fiscal 2010 in the range of $221 million to $229 million, which is 15% to 19% growth.

In May, at the end of the first quarter, it was still projecting revenue of about $225 million, or 17% growth over 2009.

The company also received approval in August from the Agriculture Bank of China for a $44.2 million loan which the company will use to fund the Changxing Island Project.

Zacks Consensus Estimates Rise

The fiscal 2010 Zacks Consensus Estimate has risen 3 cents to $2.22 per share in the last week.

Analysts are dubious about year over year earnings growth, however, as this is 1.4% under last year's earnings of $2.25 per share.

RINO is scheduled to report third quarter results on Nov 5.

RINO is Cheap

In addition to the low P/E ratio of just 6.3, which is well under its peers at 19.8, RINO also has an attractive price-to-book ratio of 1.6.

Its five year average return on equity (ROE) is a stellar 39.4%. Even if you look at just the last year, the ROE holds u pat 34.5%, compared to its peers at just 12.8%.

RINO is a Zacks #1 Rank (strong buy) stock.

Shares are well off their 52-week highs as the Chinese stocks have struggled in the last year.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.