Sutor Technology: Satiating China's steel demand

Will Atkinson | Jul 17, 2008 3:41pm EDT | Comment

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Sutor Technology Group Ltd. (Nasdaq:SUTR)
Changshu, China
http://www.sutorcn.com/en/

52-week low / high: $3.56/ $9.42
Shares Outstanding: 37.96 million
Market Capitalization: $232 million

Only five years old, Sutor Technology Group (Nasdaq:SUTR) is already one of the leading makers of steel-finishing fabrication products in China. The company makes hot-dip galvanized steel, which accounts for about half of the company’s revenue, and pre-painted galvanized steel, which made up about 32% of the firm’s revenue during fiscal 2007 ended June 30. Because of China’s skyrocketing economic expansion, most of Sutor’s products are supplied to the Chinese market, and only about 10% goes abroad.

In Sutor’s most recent quarter — the third quarter ended March 31 — the company’s revenue edged up slightly to $45.3 million from $45 million a year earlier. However, Sutor’s quarterly net income doubled to $7.8 million, or $0.21 per share, versus $3.9 million, or $0.11 per share, a year ago. Cost of revenue during the three months jumped 38% to $98.1 million from $71.3 million during the prior-year period.

For the fourth quarter, Wall Street analysts expect Sutor to post revenue of $110 million and per-share earnings of $0.21. For the year, Wall Street projects $422.5 million on earnings of $0.76 per share.

“I am pleased to report another strong quarter of growth driven by solid execution of business strategy focusing on vertical integration to provide a total solution for our customers,” CEO Lifang Chen said in a statement. “We completed Phase I of our vertical integration plan by installing the cold-rolled steel and acid-pickled steel production lines. The addition of these production lines diversified our product portfolio, enhanced the quality of our sourcing, and mitigated our supply chain risks.”

The China-based company recently shuffled its management team. On May 14, Sutor named Lifang Chen its new chief executive officer. Chen replaced Liuhua Guo, who assumed a position focused on technical issues and business development opportunities. Chen also retained her position as chairperson.

In the current volatile environment, Sutor’s stock has fared well. For the first seven months of 2008, SUTR is up 15%.