Saturday, August 16, 2008

SDTH - Precipitated growth

SDTH- a stock I followed and that I found about a year ago. SDTH does Nano Precipitated Calcium Carbonated NPCC for tires paint and various other materials. They sell their product to Tire companies as it improves rubber quality and reduce cost. As the 10Q puts it
"NPCC - The Company is engaged in the development, manufacture, and marketing of nano-sized ultra fine Precipitated Calcium Carbonated (NPCC). Limestone isconverted into NPCC by a proprietary production method. The NPCC segmentincludes the operations of the Shandong Haize Nano and Shaanxi Haizesubsidiaries.Chemical - The Company is also engaged in the manufacture and sale of ammonia-based products, namely ammonium bicarbonate, liquid ammonia, and methanol. The ammonia-based products are mainly used as chemical fertilizers and rawmaterials for the production of other chemical products (both organic andinorganic,) including formaldehyde and pesticides."


The company just reported Q208
- Revenue 75.7% yoy to $39.8 million
- Gross margin increased from 35,2 to 36.8%
- Net income increased 66.3% yoy to $10.0 million, or $0.18 per diluted share

So lets cut to the chase here, the chemical business is expected to double (due to Jinan fertilizer) in the next year and that's their cash cow (52% of rev). And fertilizers are in a nice up-trending market right now. NPCC sales grew 76.4% and they keep expanding their customer base (tire companies, auto, paper...).
With an 09PE of 15.5 an eps growth of 26, margin at 36,8% and a virtually debt free stock as they just took on 115M convertitble debt that can be repaid with their 138M of cash, this stock is clearly a steal. My 3 months target is $13.


Disclamer: I own some SDTH shares. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

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