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Based on filings with the Securities and Exchange Commission (SEC), through its 90% ownership of the Ruili Group Ruian Auto Parts Co., Ltd., a sino-foreign joint venture (the "Joint Venture"), SORL Auto Parts, Inc. (NASDAQ:SORL) (the "Company") develops, manufactures and distributes automotive air brake valves and related components to automotive original equipment manufacturers, or OEMs, and the related aftermarket both in China and internationally.

Installed on the chassis, air brake valves include a collection of various air brake components using compressed air and functioning as the execution device for service braking and parking braking. The Company's products are principally used in commercial vehicles weighing over three tons, such as trucks and buses.

The company has an established sales network of 28 authorized distributors throughout China selling to companies such as FAW Qingdao Automobile Works, First Auto Group, Dongfeng Axle, Beiqi Foton Motors, Zhucheng Automobile Works, and Liuzhou Special Auto Manufacturing. The company’s major international customers include Golden Dragon Auto Spare Parts, ITM, LIL/MILA, Makrotech, Polmo and Fota.

SORL seeks to expand its international customer base and has received delegations from Brazil, India, Russia and the United States. The company has four authorized sales centers in Australia, United Arab Emirates, India and the United States with additional offices slated to open. Sorl projects exports will increase by 30% in 2010.

By The Numbers

· The PEG ratio for SORL (0.97) is favorable. SORL seems valued at a discount with one of the lowest PEG ratios in the Auto & Truck Parts industry

· The average of the 1, 3, and 5 year EPS (basic) growth rates is a healthy 29.2%

· Debt to Equity is 0.0%

· The average of the 1,3, and 5 year Revenue growth rates is a string 23.83% and in line with the EPS growth rate

· Quarterly net Revenues are accelerating

· Quarterly EPS is accelerating

· Long-term debt ($0.00) is less than net current assets

· Both the Quick Ratio and the Current Ratio indicate financial strength

· Inventory to sales grew to 14.59% in FY08 from 7.08% in FY07 (This is a negative)

· ROE declined to 10.3% in the TTM ending 9/2009 from FY08 15.2%

· SORL is doing a good job in comparison to its peers with a Return on Assets, Return on Equity, and Revenues Per Employee

· SORL is one of the more profitable companies in the Auto & Truck Parts industry with a net margin of 8.8%. Its operating margin and net margin are among the strongest of any peer while its gross margin is above the industry median

Conclusion

Sorl Auto Parts, Inc. is a strong candidate to play the industrial expansion in China. Air brakes are a niche product but essential in the manufacture of trucks and busses. The company is already the leading manufacturer of air brakes in China. We rate SORL a buy at current price levels.

Disclosure: Author has a long position in SORL.

Source: China's Expansion Should Drive SORL's Shares Higher