China Valves Technology Inc (NASDAQ:CVVT) Stages a Rebound A Strong Q2 and Lots of Purchase Orders Fuel a Turnaround

Date:2011-09-15lile  Text Size:

China Valves Technology Inc (NASDAQ:CVVT) has caught my eye before and I’ve written positively on the Company. With that said, there’s been a recent upswing in share valuation which I think is noteworthy…

The shares were trading in the $4 range in mid May and drifted down to the $2.50 level a couple of weeks into June. The stock did rebound, on a trading session in early July to $4, showing great strength of support, but the stock slowly, steadily drifted down into the carnage of the broader markets hitting $2.50 once again. China Valves Technology Inc (NASDAQ:CVVT) drifted lower to the $2 level in the first few trading sessions of September, but a resistance level developed and the stock has managed to gain valuation; trading today in the $2.28 range.

The Company’s August 9 Q2 ’11 earnings report posted net revenues of $57.7 million, up 17.1% YOY same period. Gross profits were up 3.2% YOY and net income was plus $0.30 per diluted share.

What I’ve liked about this Company over time is the industrial market in China where it derives its revenues; for example in June, China Valves Technology Inc (NASDAQ:CVVT) tapped into valve orders in the nuclear, water, petroleum, and power plant industries: 

In June ‘11, the Company received two purchase orders from China Guangdong Nuclear Power Group for gate valves, check valves and globe valves worth $2 million; In June, the Company signed a strategic agreement with Sinopec International Petroleum to supply various valve products internationally; In June, the Company received purchase orders for a Water Diversion Project; and in June, the Company signed R&D agreements with Jiangshu Jurong Power Plant, Chongqing Shuanghuai Power Plant, Henan Sanmenxia Power Plant and Jiaozhou Longyuan Power Plants, to supply main stream valves, hydraulic inlet/outlet three-way valves, extraction check valves, and turbine vacuum butterfly valves for use in 1,000 mega watt ultra-supercritical power plants.

June was quite a month for the Company.

The short/float percentage of the stock is 11.48%, a bit high, but if the Company can keep its rebound alive by existing shareholders aggregating and new buyers coming in (the Company is followed by Piper Jaffray, Roth Capital, JMP Securities, Global Hunter, Rodman & Renshaw, and Oppenheimer) then there’s a good chance that the shorters will start buying in to cover their positions.

I haven’t, don’t, and do not intend on holding any of the companies mentioned in this article.

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