Jinpan International Limited (JST) is taking advantage of worldwide interest in wind energy as international sales rose 40% in the third quarter. The company is trading with a forward P/E of 11.67.
Company Description
Jinpan International manufactures cast resin transformers for voltage distribution equipment in China and other countries. The company’s medium voltage transformers are used in large infrastructure projects such as factories and real estate developments and in municipal projects like airports and subway systems.
Jinpan is one of only two UL certified cast resin transformer manufacturers in the world.
Jinpan Beats in the Third Quarter
On Nov 17, Jinpan reported third quarter results that blew by the Zacks Consensus Estimate by 125.49%. Only 1 analyst covered the company in the third quarter. Earnings per share were $1.15 compared to the Zacks Consensus of 51 cents. This was an improvement of 81.6% compared with the year ago period.
Sales, however, fell 1.8% to $43.9 million from $44.7 million in the third quarter of 2008 primarily due to a reduction of material costs that was passed onto customers in the form of lower unit prices.
The company has been growing its international business. In the third quarter, sales outside of China jumped 40% to $8.1 million. International sales accounted for 18.5% of net sales up from 13% of net sales in the year ago period.
Sales of cast resin transformers that benefit wind power applications boosted international sales in the quarter. International customers also bought traditional products for use in urban settings such as trains, subways and hospitals, in factories and in commercial settings such as data centers.
Wind energy applications are hot. Wind energy products accounted for 18% of net sales in the quarter while cast resin transformers made up the rest.
2009 Outlook
In the fourth quarter, Jinpan expects order volume to continue to grow but there will be pricing pressure due to lower raw material prices.
It forecasts 2009 sales to be in the range of $154 million to $159 million or basically flat to 3% higher compared to 2008 sales of $154 million. Earnings per share for 2009 are expected to be between $3.40 and $3.54.
Zacks Consensus Estimates Climb
Given the company’s guidance, the 1 covering analyst for 2009 raised the estimate to $3.41 from $2.81 per share in the last week. Earnings per share are expected to grow by 40.33% in 2009.
There are 2 analysts covering 2010. 1 of them raised 2010 full year estimates in the last week. The Zacks Consensus rose by 5.3% to $3.56 from $3.38 in that time period.
Value Fundamentals
Jinpan International is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 2.5. The company has an excellent 1-year return on equity (ROE) of 24.75%. Shareholders are also rewarded with a dividend, which is currently yielding 0.60%.
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.
