China Power Equipment In The Watch List – Stocks To Watch
11/18/2009 7:35:00 AM(RTTNews) China Power Equipment, Inc. (CPQQ.OB), a China-based manufacturer of energy saving transformers and transformer cores, is benefiting from Chinese government mandates to gradually replace the country's traditional steel core electric transformers with more energy-efficient amorphous alloy transformers in the next few years.
This was reflected in the company's third-quarter, in which the company posted more than 500% surge in profit, citing a substantial increase in customer orders that boosted the top line by more than 250%. In fact, the company says it had to outsource some production to meet the sharp rise in demand.
The company makes amorphous alloy cores and transformers, which it claims are far more energy efficient than traditional silicon steel core transformers. A typical amorphous alloy core transformer, according to the company, consumes 150 watts to operate, which is 77.6% less electricity than the 670 watts required by a traditional silicon steel core transformer.
To focus on amorphous alloy products, which constitute a bulk of its revenues, the company has exited its silicon steel cores product line. China Power derived about 5.53% of its sales from traditional steel core transformers in 2008, down from 20% in 2007. The contribution from steel core transformers has now dwindled to 1% for the first nine months of 2009 and to 0% in the recently ended third quarter.
For the third quarter, the company generated 100% of its total revenues from amorphous alloy cores and transformers, of which 73% came from cores and 27% from transformers. Revenues from cores rose by 322% to $5.8 million for the third quarter, and by 159% to $2.1 million for transformers.
Total revenues for the quarter were $7.89 million, up 252% from year-ago $2.24 million and up 34% from $5.89 million in the previous quarter. In the last two years, revenues have grown to $9.4 million in 2008 from $6.7 million in 2007.
Net profit for the third quarter rose 516% to $1.41 million from $0.23 million, while earnings per share increased 350% to $0.09 from $0.02. The company said the results were due to substantial increase in demand for its products, which are benefiting from Chinese government mandates.
In the “Eleventh Five Year Plan” announced in 2006, the Chinese government set up the goal to reduce energy consumption by 20% compared with the previous five years. The company believes that its amorphous alloy based products, which are far more energy-efficient than steel core electric transformers, are positioned to take advantage of the new industrial policy and will be supported by the government.
by RTT Staff Writer
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