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China Security & Surveillance Technology Q2 Profit Surges, Meets Estimate; Backs FY10 View - Update

Surveillance and safety products maker China Security & Surveillance Technology, Inc. (CSR) reported Monday a 174% rise in second-quarter profit, helped by large-scale government projects, improved margins as the company curtailed costs, as well as strong performance in all segments. Earnings per share came in line with Street view, while revenue fell short of expectations.

Further, for the fiscal year, the company reiterated its financial outlook, which is above the current estimate of analysts. The People's Republic of China-based company's shares are currently up more than 10% on the NYSE.

For the second quarter, net income attributable to the company surged to $17.80 million from $6.50 million. On a per share basis, earnings increased 76.9% to $0.23 on 76.01 million shares from $0.13 in the previous year on 50.02 million shares outstanding. On average, four analysts polled by Thomson Reuters expected the company to report earnings of $0.23 per share in the second quarter. Analysts' estimate typically excludes special items.

Foreign currency translation gain was $3.19 million, compared to loss of $0.16 million last year. Comprehensive income, which excludes the effect of currency fluctuations, increased to $21 million from $6.34 million in the past year. The company noted the the results of the latest quarter also benefited from a decrease in non-cash expenses as a result of the restructuring of Citadel convertible notes.

Revenues for the quarter grew 18.6% to $168.35 million from $141.92 million, attributable to the rapid growth of demand for the company's products and services in China. Analysts were expecting revenue of $177.84 million in the second quarter.

The firm indicated that government customers contributed to 55% of total revenues, while corporate customers accounted for 45%.

For the three-month period, gross margin expanded 390 basis points to 25.8%, helped by sizable government contracts in the Installation Segment. Income from operations shot up 95.4% to $24.55 million from $12.57 million, as operating margin improved 570 basis points year-over-year to 14.6%.

Looking ahead to the full year, the company reaffirmed its earnings outlook range of $1.12 to $1.16 per share on revenue ranging of $830 million to $850 million. Analysts are currently looking for earnings of $1.10 per share on revenue of $816.95 million.

CSR is currently trading at $5.88, up $0.56 or 10.53%, on the NYSE.

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