China Automotive Systems Inc (CAAS) Q2 2024 Earnings Call Highlights: Strong Growth in EPS ...

GuruFocus News
3 min read

  • Net Sales: Increased by 15.4% year over year to $158.6 million in Q2 2024.

  • Gross Profit: Grew by 29% year over year to $29.3 million in Q2 2024.

  • Gross Margin: Increased to 18.5% in Q2 2024 from 16.5% in Q2 2023.

  • Operating Income: Rose by 38.7% year over year to $10.8 million in Q2 2024.

  • Net Income: Attributable to parent company's common shareholders was $7.1 million in Q2 2024.

  • Diluted Earnings Per Share: $0.24 in Q2 2024 compared to $0.35 in Q2 2023.

  • Cash Flow from Operations: $9.1 million for the first six months of 2024.

  • EPS Product Sales: Increased by 33.7% year over year to $55.6 million in Q2 2024.

  • Special Dividend: $0.80 per common share, totaling approximately $25 million.

  • Total Cash and Cash Equivalents: $148.4 million as of June 30, 2024.

  • Revenue Guidance for 2024: $605 million.

Release Date: August 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Net sales of steering products increased by 15.4% year over year, indicating strong demand.

  • Gross profit grew by 29% year over year, driven by changes in product mix and cost control.

  • Sales of electric power steering (EPS) products rose by 33.7% year over year, highlighting growth in advanced product lines.

  • Operating income increased by 38.7% year over year, despite higher R&D and SG&A expenses.

  • A special dividend of $0.80 per common share was declared, reflecting confidence in sustainable growth and cash generation.

Negative Points

  • Sales in the Chinese commercial vehicle market declined by approximately $1 million, indicating challenges in this segment.

  • North American sales decreased by $2.1 million year over year, primarily due to reduced demand from Stellantis.

  • Net income attributable to shareholders decreased to $7.1 million from $10.5 million in the same quarter last year.

  • Diluted earnings per share fell to $0.24 from $0.35 in the second quarter of 2023.

  • Foreign exchange volatility led to a net financial expense of $0.7 million, compared to net financial income of $4 million in the previous year.

Q & A Highlights

Q: Gross margin has increased to 18.5% in the second quarter. What is the outlook for the gross margin going forward? A: Jie Li, Chief Financial Officer, explained that the gross margin improved due to increased EPS sales volume and higher value-added products. The company is confident in maintaining at least an 18% gross margin for the rest of the year.

Q: How much are your capital expenditures in 2024, and in what product areas are these investments being made? A: Jie Li stated that the capital expenditure for 2024 is projected to be $25 million, with $10 million already spent in the first half. About 80% of the budget will be allocated to EPS-related products, with the remaining 20% going to traditional products.

Q: Should we expect the same revenue of $158 million in Q3, and how is the first month of Q3 looking? A: Jie Li noted that Q3 is typically lower due to seasonal factors like summer heat affecting production schedules. However, the company maintains strong growth momentum and expects Q3 to align with prior year seasonality.

Q: Should we expect future dividends or share buybacks? A: Jie Li mentioned that future capital allocation decisions, including dividends or buybacks, will depend on cash flow and capital expenditure needs. The company will announce plans based on these factors.

Q: What percentage of R&D is spent on traditional products versus EPS products? A: Jie Li indicated that R&D spending is split evenly, with 50% allocated to traditional steering products and 50% to EPS products, reflecting the importance of EPS in the future automotive industry.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Recommended Stories