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rknapton (< 20)

February 2010

Recs

2

CHOP

February 26, 2010 – Comments (0)

CHOP.

Seems alright.  They are a Chinese producer of cold-rolled steel.

The business itself, I have no unique insight on.  I have no idea what pricing power any cold-rolled steel producers may have, or how commodity like that product is, or what inventory levels may exist.

But the numbers seem good.  There is only one analyst covering the company, and based off his projected EPS of $0.84 for this year (2010), that brings about an attractive P/E of less than 8.  From a balance sheet view, the company is fine, they have some debt, but the interest expense on that isn't strangling the company at all, and they have a good amount of cash too.

It looks like growth has slowed a bit... but they address that in their investor presentation, and say that isn't due to a lack of demand, but that their production lines are near capacity... so they are making a new production facility that will be able to double their production capacity by 2011.  If they can have near the same margins on this... that would make the stock real real cheap.... but like I said, I don't know anything about how prices for cold-rolled steel fluctuate.

The analyst is predicting annual growth of over 17% for the next 5 years... so if this is anywhere near accurate, and the market for cold-rolled steel remains as profitable as it has been for them... then I think this stock is quite a bargain.

I'll be adding a position of it to my Chinese basket of stocks.

RK  [more]

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