This Stock Ready to Blast Off on Growth

Another one of my favorite small companies just reported excellent financial growth in the second quarter.

Wonder Auto Technology, Inc. (NASDAQ/WATG) slightly beat Wall Street expectations and is very well-positioned to continue growing over the next several years.

Based in Jinzhou City, Liaoning, China, Wonder Auto Technology operates through a number of subsidiaries that design and manufacture automotive electrical parts and suspension components. In 2006, the company ranked second in sales of automotive alternator and starters in the Chinese market.

Wonder Auto currently sells five different series and over 150 models of alternators, 70 models of starters and various suspension-related parts, supplying a number of auto makers, engine producers and auto parts suppliers in China and abroad. Some of the company’s customers include Beijing Hyundai Motor Company, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., Harbin Dongan Automotive Engine Manufacturing Co., Ltd., and Tianjin FAW Xiali Automotive Co., Ltd.

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According to Wonder Auto, its second-quarter revenue grew to a record almost thirty-seven million dollars, representing a 56% increase from revenues of close to twenty-four million dollars generated in the second quarter of 2007.

The company cited that most of its sales growth was due to increased demand for its alternators and starters from OEMs in China. Like consumers around the world, Wonder Auto noted that Chinese consumers are increasingly interested in smaller vehicles, and this trend has benefited the company, as most of its products are geared to this market.

Gross margin was 25.9% in the second quarter, up slightly from gross margin of 24% in the second quarter of 2007.

Net income grew 37% to a quarterly record of $5.3 million, or $0.20 per diluted share, up from net income of $3.8 million, or $0.16 per diluted share, generated in the comparable quarter.

Looking ahead to the third quarter of 2008, Wonder Auto Technology expects its revenues to grow to thirty-nine million dollars, representing approximate sales growth of 43%.

In my mind, a company like Wonder Auto Technology is only going to grow over the next several years, while other auto suppliers stagnate. This company has the small-car products that manufacturers want, all available at the best price in town. The Chinese global invasion of the auto business is just beginning.