Puda Coal Fires Up Earnings Season With Surprising Q2 Results

Aug.16.10 | About: Puda Coal, (PUDA)

Click to enlargeThis morning Puda Coal (OTC:PUDA) reported a whopping 50% beat on its Q2 earnings. PUDA reported .36 while the street expected only .24. PUDA is a coal mine consolidator and producer of clean metallurgical coal in China. Being an uplisted Chinese stock it is still very untrusted and under followed. They reported $82M in revenue for the quarter so its not a small operation. Not to mention that the consolidation of 12 mines over the next year or so should add significantly to revenues creating a decent sized coal miner. Everybody currently wants operations in Australia so why not go directly to the source and buy assets directly in China?

The stock trades at a significant discount to its prospects and risks currently trading at just 4x the estimated 2011 earnings of $2.17. Considering how easily they just beat the Q2 numbers those could turn out to be very conservative. The market continues to doubt these Chinese stocks but at some point they won't be able to doubt their prospects.

Highlights from Q2 earnings report:

  • Second quarter revenue increased 71.5% year over year to $82.3 million.
  • Gross profit increased 235.2% year over year to $12.1 million.
  • Gross margin increased to 14.7% from 7.5% a year ago.
  • Operating income grew 291.0% year over year to $10.4 million.
  • Net income rose 400.5% to $8.7 million from $1.7 million in the second quarter of 2009.
  • Excluding non-cash gains related to the fair value of derivative warrants, adjusted net income rose 295.5% to $7.3 million, or $0.36 per diluted share.
  • Sales of cleaned coal increased 36.5% year over year to 601,000 metric tons (MT).
  • Average selling price of cleaned coal grew 25.7% year over year to $137 per MT.
  • PUDA acquired 100% of the assets and mining rights of the Da Wa Coal and Guanyao Coal mines in Pinglu County for an aggregate purchase price of $42.0 million

Disclosure: Author long PUDA