Harbin Electric Inc. (HRBN) is a dirt cheap Chinese stock. The company is trading at just 6.6x forward earnings, well under its industry average of 14.
Harbin Electric is a Chinese manufacturer of electric motors, including linear motors, automobile specialty micro-motors and industrial rotary motors. Its customers include those in the energy industry, food processing, transportation, medical devices, chemicals and machinery and tool manufacturing.
It operates 4 manufacturing facilities in China but has both domestic and international customers.
Harbin Reports a Record First Quarter
When I last reviewed Harbin in November 2009, the company was seeing a boost in sales due to the massive Chinese stimulus plan while its North American sales remained soft.
Flash forward, and Harbin is now seeing the payoff from the recovery in the Chinese economy with first quarter sales tripling to $105.5 million compared to $30.7 million in the year ago period.
Also back in November, I talked about Harbin’s acquisition of competitor Xi’an Simo Motor Group. That acquisition has been fully integrated and contributed $45 million in sales in the quarter. Even if you strip out the acquisition, sales still rose 97% compared to a year ago.
International sales still make up a small percentage of overall sales but this jumped 117% to $7.1 million from $3.3 million in the first quarter of 2009, when the global economy was in the midst of the massive global recession.
International sales were boosted by demand in the specialty micro motor and rotary motor products.
Harbin Beats For the 5th Time in a Row
Harbin reported first quarter earnings on May 10 and easily surprised on the Zacks Consensus by 37%.
Earnings per share were 67 cents compared to the Zacks Consensus of 49 cents. It has put together a nice string of earnings surprises now, beating each of the last 5 quarters.
Outlook
The company saw continued strength in demand as it started the second quarter and also saw stronger activity from its international markets, especially North America.
It didn’t give earnings or sales guidance. But Harbin did say that the Chinese government plan to cool the housing market shouldn’t impact it much as it’s much more diverse than just housing. It continues to see strength in other sectors such as manufacturing and agriculture.
Zacks Consensus Estimates Jump
There are 2 estimates on Harbin. 1 has moved higher in the last 30 days for both the second quarter and the full year.
The second quarter Zacks Consensus has jumped by 5 cents to 69 cents in the last month. The 2010 Zacks Consensus, likewise, is up 14 cents during the same time period.
This would be earnings growth of 62% compared to 2009.
Value Fundamentals
In addition to a cheap P/E ratio, Harbin also has a low price-to-book ratio of just 1.5, which is under the industry average of 2.
Its PEG ratio is just 0.23.
The company also sports an attractive 1-year return on equity (ROE) of 19.4%, which easily surpasses the industry average of just 1.3%.
Harbin is a Zacks #1 Rank (strong buy) stock.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
