Wonder Auto (WATG) Shows Improvements

Wonder Auto Technology Inc. (WATG) posted a net income of $8.3 million or 24 cents per share in the second quarter of 2010, up 54% from $5.4 million or 20 cents per share in the year-earlier quarter. Wonder Auto’s net income left behind the Zacks Consensus Estimate of 19 cents per share.

Revenues of $68.5 million experienced a 37.9% improvement over the same quarter last year. However, revenues fell short of the Zacks Consensus Estimate of $66 million for the quarter. In China alone, Wonder Auto’s revenues improved 41.1% over the second quarter of 2009 to $60.9 million.

The increase in revenues is attributed to the improved sales of its alternator and starter products, rods and shafts, and engine valves and tappets. The main catalyst behind this is the expansion of the automobile market that in turn led to higher demand for its products.

Gross margin of Wonder Auto saw an improvement from 24.6% in the prior-year quarter to 25.1%. The primary contributing factor is the improved gross margin of its engine valves and tappets through increased sales of these products to the heavy-duty engine sector, which guarantees higher margins.

As of June 30, 2010, Wonder Auto had cash and cash equivalents worth $61 million. Secured borrowings were $85 million.

The company expects to achieve a minimum of $69 million of revenues in the third quarter ending on September 30, 2010 . Wonder Auto expects that acquiring new clients, especially outside China, and launches of new product models will act as key growth drivers. Moreover, a pending merger and acquisition project with Jinheng Automotive Safety Technology Holdings Limited is likely to boost earnings.

Wonder Auto Technology is a China-based designer, developer, manufacturer and seller of automotive electrical parts, suspension products and engine components. Beijing MOBIS Auto Parts & Components Co. Ltd., Shenyang Aerospace Mitsubishi Motors Engine Co., Shanghai VW and Weifang Diesel Engine are some of its prominent customers.

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