My China play: SDTH

[David Randolph]

Thanks for posting SDTH's 4th quarter and full year 2007 results soxguy

ShengdaTech, Inc. Announces Record Fourth Quarter and Full Year 2007 Results
PR Newswire(Mon 7:00am)

As I repeatedly wrote, SDTH beat its own guidance by a good margin:

«Record net income increased 54.2% to $27.0 million, or $0.50 per diluted share; exceeding guidance of $23.0 million to $24.4 million», or $0.43 per diluted share.

As for 2008 guidance ...

«The Company expects 2008 revenue and net income to be in the range of $132 - $134 million and $33 - $35 million, respectively, for fully diluted earnings per share of $0.62 - $0.65.»

... which is 13.4% above analysts expectations:



The numbers are just a bit shy of my optimistic expectations, since I called for 15 cents EPS in the 4th quarter (and the actual number was $0.14) and for something like $0.65-$0.75 for 2008 guidance, but still the numbers are better than the market's expectations.

I also enjoyed the following information:

«ShengdaTech is in the process of completing the test runs on its three new stainless steel NPCC lines in Xianyang City, Shanxi Province. Each line has 20,000 metric tons production capacity and is expected to ramp up to full capacity by August 2008. The stainless steel lines have a production life of 30 years compared to 10 years for carbon steal lines. In addition, the stainless steel ensures the purity of the NPCC particles enabling the Company to target higher-end markets and international manufacturers. The Company has been successful in developing and commercializing new applications of NPCC for paper and polyethylene manufacturing, and is working on developing new NPCC applications in a variety of markets such as asphalt, automobile paint and silicone-adhesives.»

Asphalt can be huge

Everything is on track for SDTH to ramp up its NPCC production capacity to 1,000,000 metric tons in a few years time as it is their plan, up from the current 160,000 metric tons. In my view the company should then be worth about $5 B, up from the current $507 M (I believe the stock is undervalued at this point, trading at 14.7 times 2008 estimated EPS).

I'm not sure if the market will like the numbers or not, or if SDTH's share price will rise or fall (due to a potential multiple contraction) over the next couple of months, but there's good visibility into the company's future growth.

I'll continue holding SDTH for the long term.

[David Randolph]

Well, it's hard to argue with a 12.5% drop, especially when I had been winning 100% plus in this stock and now have just 21% profit to show

SDTH's technicals deteriorated somewhat, with the stock closing below the $8.5 support level. However, if one is talking long term as I am, the "important" technical indicator is the 200 days moving average and the price remains above that one as you can see on the following chart:



"Wow, that was reassuring", you could comment

Anyway, turning to the fundamentals, SDTH's management was kind to provide a transcript of yesterday's conference call, which you can read here:

SDTH conference call transcript

The information provided shows that SDTH's NPCC business is still in its early stages and the best is yet to come. There's little doubt that demand for NPCC will continue to increase as the company keeps adding new costumers. In the Q&A session management said they expect to have 15% of revenue coming from international sources, compared to 1% in 2007.

I wrote one thing wrong yesterday, they currently have just 130,000 metric tons of NPCC production capacity and are expected to add another 60,000 in 2008 and another 60,000 in 2009. The ramping up to the long term objective of 1,000,000 metric tons of capacity may take more time than I initially expected, but I have no doubts that it will happen.

I see this company's earnings growing between 25% and 30% a year for the long term, let's settle at 27.5%, which is the company's target for 2008. The growth rate is 27.5% and the forward p/e is 12.9. This isn't right, the p/e should at least equal the growth rate and SDTH should be trading at $17.46 now. If it weren't for these nasty market conditions ...

Finally, I find SDTH one of the most interesting and promising investments around and I'll continue holding it for the long term, regardless of the share price.

[David Randolph]

Technically SDTH looks weak, having closed below the $8.5 horizontal support and below the 200 days SMA.

Fundamentally it looks very attractive, being valued at 11.8 times 2008 expected EPS and with a long term growth rate of 27.5%. I find this growth rate very reliable ... the only thing I worry about is the availability of limestone to make NPCC. I think demand is not a risk here.

It appears that "confidence" is a more important factor driving the stock prices over the short and medium term than "value".

How can I measure "confidence"? And should I act when it changes, or ignore it? These questions and their subjectivity make me wonder if I should invest in stocks at all.

I'll keep holding SDTH.

[terainvestment]

Hi David,

I think I got why SDTH fell 12,5% after earning release.
I carefully read the transcript of conference call and that's what I found:

1) We (SDTH board) can't add capacity to existing sites.
2) The management changed in SECONDS the answer to a simple question from an analyst, who asked: when the new sites will be completed? The Answer: management said they completed the new sites on jul-09, then seconds later moved the deadline to end of 2009, with new revenue coming on 2010.

Is this management reliable?
what do you think?

If they can't add new capacity, as they stated, the 2009 will be flat in grow and that's why stock price is now at 8$ or 9$ and going up and down like a jojo.

Tera

[David Randolph]

Hi David,

I think I got why SDTH fell 12,5% after earning release.
I carefully read the transcript of conference call and that's what I found:

1) We (SDTH board) can't add capacity to existing sites.
2) The management changed in SECONDS the answer to a simple question from an analyst, who asked: when the new sites will be completed? The Answer: management said they completed the new sites on jul-09, then seconds later moved the deadline to end of 2009, with new revenue coming on 2010.

Is this management reliable?
what do you think?

If they can't add new capacity, as they stated, the 2009 will be flat in grow and that's why stock price is now at 8$ or 9$ and going up and down like a jojo.

Tera

Nah, I don't think it was that, SDTH's management is just too conservative. They always give guidance and projections at the worst case scenario. They didn't say they "we can't increase production" at all. I didn't hear that, did you?

SDTH is back above the $8.5 support, so, was that a false technical signal? It appears that it was ... one had to have exceptionally strong hands to hang on to SDTH on that break and I'm glad that I did.

I'll keep holding SDTH for the long term.

[terainvestment]

SDTH CONFERENCE CALL TRANSCRIPTION (http://seekingalpha.com/article/68878-shengdatech-q4-2007-earnings-call-transcript?source=yahoo&page=1)


Andrew Baswell - NNO Capital

I guess I am talking about any existing buildings. I thought from prior discussions that it was relatively a straight forward proposition. If needed after this additional 60,000 comes on line to add additional lines in there and expand capacity further within that -- those same factors.

Anhui Guo (Interpreted)

So, the existing facility, the existing buildings in Xianyang, the Company could not add anymore new production lines and let's say they built a new buildings on the new land.
-------------
During the call, SDTH affirmed that above. Before of the statements above reported, When they refer to new building, they are referring to the new facility that will be completed on June-09...seconds later, this deadline was moved to December 2009.

I think the CC was a total chaos as per what I read on the transcription ;-)
But I supposed the market understood very well, putting SDTH underwater.
That's why I sold SDTH today and shifted to ASTI.

May be I am wrong, time (as ever) will tell.
Hopefully 

[David Randolph]

During the call, SDTH affirmed that above. Before of the statements above reported, When they refer to new building, they are referring to the new facility that will be completed on June-09...seconds later, this deadline was moved to December 2009.

I think the CC was a total chaos as per what I read on the transcription ;-)

I don't think it was a total chaos, but as you say, there are issues.

It was clear that:

1 - SDTH currently has 130,000 metric tons of annual capacity;
2 - Another 60,000 metric tons came online in March 2008, pushing annual capacity up to 190,000 metric tons;

«In 2007, we added 40,000 metric tons of NPCC capacity bringing our total NPCC capacity to 130,000 metric tons. This month we completed the construction of our first new stainless-steel NPCC lines with 60,000 metric tons of capacity which are scheduled to begin production by the end of the month.»

«We anticipate our new lines will reach full capacity by August of this year, increasing our total annual production capacity to 190,000 metric tons.»

The company is pursuing a further expansion in capacity:

«We are actively exploring potential sites in Shandong Province for the next phase of our NPCC expansion and are currently in negotiations with the local government in Shandong for use of high quality limestone quarry that's located here in the Shandong Province.»

«So as mentioned earlier, if we can begin the construction this August or September the construction can be completed by next July or August.»

The analyst's issue is that production capacity will only rise beyond 190,000 metric tons probably in Q4 2009. He's worried that there won't be growth in 2009 versus 2008 due to production capacity limitations.

This is a valid concern for a medium term investor, but not for a long term investor, because sooner or later, this company will reach 1,000,000 metric tons of annual production capacity of NPCC. Demand is not an issue here.

So, what if 2008 EPS is $0.62 and 2009 EPS is $0.70 ... does it matter all that much if 2010 EPS is $1 or more?

It's going to require patience (a lot more than I initially thought, perhaps because investors now just believe in hard facts and are not paying attention to projections or the future all that much).

A year ago it was possible for a stock to discount the earnings and their projection 3-5 years into the future. This isn't happening now, at least not to the same extent.

Anyway, SDTH continues to be a solid long term investment.

That's why I sold SDTH today and shifted to ASTI.

May be I am wrong, time (as ever) will tell.

Time already said your shift was a good move. Congrats

[David Randolph]

Now these guys said they won't increase NPCC production between August 2008 and August 2009 ... just thinking I could have made 100% profit in a couple of months and then put the money to work elsewhere ... it shows me I shouldn't invest for the long term.

It appears the "long term" strategy is much better suited for large caps than small caps. But I'm not sure about this.

There can be news of acquisitions in the chemical sector which may boost SDTH, or else the stock may remain asleep around current levels for a prolonged period of time.

Well, but I'm not going to think that just because the TM Portfolio started well that is the best strategy ...

I'll keep holding SDTH.

[David Randolph]

Press release out from SDTH:

• ShengdaTech Begins Production on New Stainless Steel NPCC Lines
PR Newswire (Mon 8:00am)

Nothing new here. What the market is wary about are the expansion plans after this one. Again, demand is not an issue here, but how fast the company can increase supply.

I remain confident that over the long term everything will play out well, but with the current information investors don't see any growth in production capacity of NPCC between August 08 and August 09. Maybe the price will rise to compensate for the lack of supply.

I'll continue holding SDTH for the long term.

[la-onda]

chart looks better now....

cheers
O.

[David Randolph]

chart looks better now....

cheers
O.

Yes, SDTH looking better from a technical standpoint, closing just above $9 yesterday:



Let me copy/paste the analysis I have here, from Roth Capital Partners, published after the 4th quarter earnings release:



Q4'07 Results in Line, Guidance Above View

Q4'07 revenue rose 24% yoy to $28.6 million, ahead of our estimate by $1 million. Net income grew 27% yoy $7.8 million, or $0.14 per share, in line with our estimates. For FY2007, revenue rose 39% yoy to $100.7, topping guidance of $98 million. Net income of $27.0 million also beat guidance of $24.4 million.

NPCC revenue rose 47% yoy to $13.8 million, accounting for 48% of total revenue in Q4'07. Strong demand for NPCC products from tire, PVC and latex sectors drive the volume to 35,680 metric tons in Q4'07, in-line with our estimate of 35,292 tons. Tire and PVC remain the two largest sectors for NPCC products, representing 43% and 39% of total NPCC sales respectively.

Gross margin hits record of 35.8%, compared to 33.6% in Q4'06, resulting from higher margins in the chemical segment (29.5% vs. Roth estimate of 27.8%). However, gross margin for NPCC was 42.6%, down 1% sequentially, due to higher depreciation expense, cost of coal and transportation costs.

Management issued FY08 revenue guidance of $132 to $134 million and net income of $33 to $35 million, equivalent to fully-diluted EPS of $0.62 to $0.65. Both top line and bottom line guidance are significantly higher than our estimates of $124 million in revenue and $0.56 in EPS.

SDTH is developing new NPCC application in a variety of markets, including polyethylene, asphalt, automobile paint and silicone adhesives.

Acquisition and capacity expansion under evaluation. Management says it is aggressively evaluating acquisition targets in the chemical business and looking for potential sites in Shangdong province for the next phase of NPCC capacity expansion, possibly in late 2009.

We raise our estimates based on new guidance and assume capacity expansion will take place in Q4'09. We now raise our revenue estimates for FY08 from $124.3 million to $132 million, and EPS estimate from $0.56 to $0.62. We further raise our 2009 revenue estimate from $139.9 million to $149.3 million, while raising our FY09 EPS estimate from $0.63 to $0.67.

Shares appear under valued. Trading under 15x of FY08 estimated EPS, SDTH shares trade at discount to its own growth rate of 23%.

SUMMARY

Financial Results Review and Conference Call Recap

The chemical segment was largely responsible for upside to the quarter. Revenue from this segment reached a record $14.8 million and gross margin climbed to 29.5%, the highest in two years. Despite higher raw material prices, the chemical segment demonstrated strong pricing power customers reacted well to higher prices. Sales of liquid ammonia and methanol increased 9.8% and 8.3% sequentially, more than offsetting the 6.3% decline in sale of ammonia bicarbonate.

On the conference call, management made clear it intends to acquire local chemical enterprise with inefficient operations and distressed value. SDTH targets the same or closely-related business in order for a quick turnaround.

For the NPCC segment, management announced 13 new customers, including five tire manufacturers, three PVC producers, three latex producers, a paint manufacturer and a paper manufacturer. Sales for NPCC's latex application grew 21% yoy, now comprising 10% of total segment sales. Management reiterated that its project phase III in Xianyang is expected to reach full capacity in August 2008. For the additional 60,000 tons of capacity, the Company expects that existing customers will absorb 60-70% of the new capacity.

Management further announced its intention to aggressively pursue international market and expects export sales to reach 10-15% of total sales, from 1% in 2007. It intends to recruit 12 English-speaking sales reps and establish an office overseas in 2009.

Management intends to build a new facility for 60,000 m/t of NPCC in Shangdong province, which is new news to some investors. The Company indicates that the potential site in Shangdong is close to a limestone reserve and will save transportation costs. The site selection also fits into the aggressive export strategy. Management is in the process of negotiating with local government and expects the new facility can be operational as early as August 2009, or by the end of 2009 to be the latest. Capital investment is expected to be RMB400 million, or $57 million at current exchange rates. It implies that SDTH could run at full capacity for 12 to 16 months after the production ramp up in August 2008.

Cash and equivalents declined to $26.4 million as of December 31, 2007, from $41.1 million in the previous quarter. Advances to suppliers jumped from $0.53 million in Q3'07 to $19.4 million at the year-end. We await the 10-K filing for more details.

New Guidance for 2008
FY08 revenue is expected to be in a range from $132 to $134 million and net income in a range from $33 to $35 million, equivalent to fully-diluted EPS of $0.62 to $0.65. Both top line and bottom line guidance are significantly higher than our estimates of $124 million in revenue, $30.6 million in net income, and $0.56 in EPS respectively.

Major Development in NPCC Application
Entering 2008, SDTH announced three major developments in NPCC application.

NPCC use in polyethylene--ShengdaTech announced on February 27 that it has successfully developed a new NPCC product for use in polyethylene (PE) plastic products. We view such development a major breakthrough for the company as it brings NPCC to a new product application whose market potential can be as big as PVC. Recall PVC accounted for 37% of Q3'07 NPCC sales.

PE is a large plastics category widely used for consumer products. Global consumption is expected to be 87.4 million metric tons by 2010, according to Univation Technologies, a technology licensor to the world's PE industry. The use of NPCC in PE products will increase its heat-resistant capability and reduce the quantity of heat of combustion and secondary pollution. It can also enhance the PE's printing quality and surface smoothness, and reduce the amount of PE needed in production, resulting in lower overall cost of raw materials.

Peter's Polyethylene Industries Pte., Ltd., the largest plastic manufacturer in Singapore for litter bins, plastic bags, and office products, will be SDTH's first PE customer, after one year of collaboration. It will initially incorporate NPCC in its plastic barrels for industrial use and polypropylene film.

NPCC use in paper—SDTH announced on January 2 that it developed a new NPCC product, NPCCB-100, for use in surface coating for premium color ink jet paper. The introduction of NPCC is expected to improve paper's whiteness, brightness, smoothness, ink absorption while reducing the amount of kaolin or titanium which is more expensive than NPCC. At this stage, NPCC is primarily used for surface coating in specialty papers.

NPCC use in asphalt--ShengdaTech also announced that it is working with Tongji University, a well-known school in Shanghai for its expertise in construction, for NPCC use for asphalt, and expects to bear fruit in the next two months. In addition, SDTH is developing new NPCC applications in a few new markets such as automobile paint and silicone-adhesives.

While we do not expect a substantial sales volume from these two applications in the near term, we believe it brightens long-term prospect for SDTH's NPCC sales as competition heats up. We anticipate the sale to Peter's Polyethylene to boost SDTH's export business and help to absorb additional capacity as project phase III is completed in March, which may give management more confidence in capacity expansion.

Competition May Heat Up
Growing demand of NPCC has led to continuous capacity expansion in China. According to China Chemical Reporter, a weekly trade publication, total output of nanometer calcium carbonate reached 300,000 metric tons in 2006, compared to less than 100,000 tons in 1999. Demand is estimated at 750,000 tons in 2010.

Similar to SDTH, the industry has expanded NPCC applications from rubber and ink sectors to plastics, coating, adhesives and papermaking sectors. According to China Chemical Industry News (CCIN), rubber accounts for 40% NPCC sales in China, followed by paint and construction (30%), plastics (15%), ink, toothpaste and other chemicals (10%), while paper accounts for 5% of NPCC use. CCIN estimates that 2008 NPCC demand in China will exceed 520,000 metric tons.

We have identified approximately 20 NPCC manufacturers in China, with production capacity ranging from 3,000 tons to 100,000 tons. One of China's first NPCC producers, Guangping Chemical Enterprise has expanded its capacity from 15,000 tons to 50,000 tons. Another NPCC producer, Enping Jiawei Chemical Enterprise announced its completion of a 90,000-ton production line for its Baiyinghua brand NPCC products. The city of Enping, Guangdong province where both manufacturers are located, has planned to double the city's NPCC capacity to 300,000 tons in five years. Other provinces such as Ningxia, Henan, and Guangxi have announced expansion plans. Guofeng Group, a plastics manufacturer in Anhui province, also
announced to install large NPCC production lines.

It is important to note that some of these companies may not directly compete with SDTH due to its application, process and prices. It appears SDTH sells premium quality NPCC versus its competitors, based on its ASP of $380 per ton versus the $122 per ton for average NPCC exports from China in 2006. While a few competitors sell for similar prices, we found more producers selling in the range of $225 to $290 per ton. Our interviews with SDTH customers also confirm that many NPCC producers do not produce nano-grade calcium carbonate despite their claims.

Internationally, we anticipate SDTH may face challenges from several well-established chemical firms including Monsanto (MON-NC-$108.58), Solvay, and Shiraishi. Solvay Chemical & Pharmaceutical Group is a Brussels-based chemical firm, with 29,000 employees in 50 countries and EUR9.6 billion in annual sales. Shiraishi Kogyo Kaisha is a Japanese chemical boutique specializing in calcium carbonate for over a century, with over 300 employees. We believe SDTH will enjoy price advantage over these competitors for the time being.

Business Outlook
In the near term, tire and PVC will remain the two major applications for NPCC products. Recall that foreign brands control 70% of China's passenger tire market. We consider a penetration into any major brand as strong endorsement for ShengdaTech's product quality, which may result in snowball effect.

The tire industry in China faces over capacity and declining gross margin, as a result of export VAT rebate cut and rising production costs, which should play well for good-quality low-cost NPCC producers such as SDTH as tire manufacturers continues to look for ways to improve its tire quality and lower costs. Several international tire makers have indicated a willingness for local procurement, and we have read reports that Hankook Tire of Korea has already purchased carbon black locally while Bridgestone has placed more emphasis on local R&D. Domestic tire manufacturers may grow their business through exports and OEM for global brands in the Chinese market.

Due to a strong pricing environment and increasing concerns of inflation, we expect chemical business to grow at 10% in FY08 and 8% in FY09, which is substantially slower than the NPCC segment. Accounting for 52% of total revenues and 41% of gross profit, a slow-growth chemical segment remains a drag to the firm's overall EPS growth. If the acquisition materializes, the chemical segment will claim an even bigger share of the overall business, particularly at the time when NPCC reaches the full capacity.

VALUATION

Estimates Raised and Basis of Adjustment

We have revised our FY08-09 revenue and EPS estimate based on management guidance, under assumptions of over 100% capacity utilization. We expect the chemical segment to grow 10% in 2008 and 8% in 2009, due to the inflationary environment in China. As a result, we project NPCC sales to account 55% of total sales in 2008 and 57% in 2009.



We maintain our gross margin expectation for NPCC at around 42% for both 2008 and 2009, but we raise our margin estimates for the chemical segment from 25% to 29%, given its strong showing currently and improved production efficiency.

SG&A expenses are expected to increase as a percentage of total revenue as the firm aggressively pursues export market and incurs increasing expenses as a public company.

We raise our estimates based on new guidance and assume capacity expansion will take place in Q4'09. We now raise our revenue estimates for FY08 from $124.3 million to $132 million, and EPS estimate from $0.56 to $0.62. We further raise our 2009 revenue estimate from $139.9 million to $149.3 million, while raising our FY09 EPS estimate from $0.63 to $0.67.

Valuation
Based on approximation of segmental distribution of gross profit between chemical and nano-materials of 41% and 59% respectively, we are able to segregate their individual valuations.





When comparing to US peer group, the SDTH chemical operation has a higher than average EV/EBITDA and P/E multiple for FY08. For NPCC products, a relatively newly developed segment, P/S multiples are applied to reflect the typical high growth and loss-incurring pattern. We find SDTH's multiple lower on a P/S basis from FY07 to FY09.

RISKS

Inflation and rising commodity costs
The Chinese economy is obviously inflationary. On Mar 11, the National Statistics Bureau has released the Feb 08 CPI hiked to 8.7%, another decade high. Two days earlier, PPI was announced to have jumped to 6.6%. Bank minimum reserve requirement and one-year loan rate is rising alternatively, reaching 15% and 7.46% alternatively. During March, another rise of interest rate is highly expected. However, we consider the inflation primarily driven by meat and grain shortages cannot be reverted in the near term.

Chinese businesses are increasingly challenged with higher financing expenses on top of their rising raw material costs and freight charges, all of which are adversely affecting profitability. In particular for SDTH, it is debt-free, yet is exposed to the rising cost of commodities.

Management's ability to explore new application for NPCC and subsequent market penetration and commercialization
Currently the company's NPCC products are heavily reliant upon the tire industry (43.4% of total NPCC revenue for Q4'07). Recent announcements disclosed potential applications in PE, PVC and even for color ink jet paper.

The company's ongoing growth prospect depends on management's stress on R&D development for additional new applications; as well as marketing efforts in commercializing them. Should it be unsuccessful in penetrating new industries, growth sustainability would be seriously challenged.

Chemical: extra cost on relocation and compliance in stricter governmental mandates for
environmental protection; limited distribution distance
Most of the company's chemical products are flammable, explosive, and dangerous and pose a threat to the health and safety of employees and residents around its facility. Current location of SDTH, which is in the urban area of Tai'an City may result in uncertainties in three-folds:

1) extra cost will arises should relocation deemed necessary
2) extra cost will arises should SDTH is obligated to comply stricter governmental mandates for
environmental protection
3) possible production interruption may happen, should either 1) or 2) incurs

Communication barriers: language ability of management teams
Not having English speakers at senior management level can, from time to time, lead to miscommunication and effectiveness and efficiency interactions with investors.

Personal Comment: All I have to say is "Wow" and "my analysis are far inferior to these, because I don't have the same research tools or time to do them". From now on I'll use this service (Thomson One Analytics) as a support for my fundamental analysis.

[David Randolph]

Good news out for SDTH:

ShengdaTech Adds Three New Customers, Updates International Market Expansion - PR Newswire

Management seems to be executing on their international expansion strategy, but again, demand isn't the issue, the problem is capacity production. SDTH is fundamentally attractive at this point, but until there's material information on an expansion of production capacity of NPCC (or news of an acquisition in the chemical segment), I guess SDTH will trade between $7 and $10 or so.

Anyway, I don't see relevant risks and the long term growth story remains intact, I'll keep SDTH in the Main for the long term.

[David Randolph]

SDTH will report 1st quarter results tomorrow before the open. Analysts are expecting $0.13 EPS on $28.25 M revenue. I think the company may very well beat this expectation.

SDTH looks to me at rock bottom valuation, but there isn't a positive catalyst to move it significantly higher at this point. These catalysts could be coming from an acceleration of the expansion plans in terms of NPCC's production capacity or an acquisition in the chemical sector.

We'll see if there's anything material coming out with tomorrow's results and conference call.

I'll hold SDTH through earnings.

[David Randolph]

SDTH will report 1st quarter results tomorrow before the open. Analysts are expecting $0.13 EPS on $28.25 M revenue. I think the company may very well beat this expectation.

The numbers were released on form 10-Q filed with the SEC (no press release, at least, not yet).

The company beat expectations on revenue and EPS. Revenue for the quarter was $28.55 M and EPS was $0.14.

It's interesting to note that, if EPS were calculated using "comprehensive income", that is, taking into account gains due to changes in exchange rates, EPS would then be $0.21.

Even though the company had positive net income of $7.4 M, cash and equivalents decreased because the company invested $23.3 M in "purchase of property and equipment and construction in progress".

Overall I believe results were good, with EPS up 40% from a year ago.

The conference call begins within 7 minutes. I'll listen to the replay later and will post what analysts have to say about it.

Everything seems on track with SDTH, I'll keep holding for the long term.

[Rmagos]

Some more "food"


ShengdaTech reports Q1 EPS of $0.14 vs $0.13 single est; revs rose 28% YoY to $28.6 mln vs $28.25 mln single est (8.12 ) 

''Demand for our NPCC and chemical products remains strong. We will continue growing our NPCC business by expanding capacity, developing new, higher-end applications and by continuing to market our proven value proposition to increase penetration in our domestic market, while significantly expanding our international sales... We are aggressively evaluating acquisition candidates in the coal-based chemical business and exploring potential sites in eastern China for the next phase of our NPCC expansion. Our new facility will be in close proximity to a high-quality limestone quarry in order to produce high-quality NPCC products while reducing raw material cost. The new facility will also be close to a sea harbor which facilitates our exports.''