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ONP: Trading well below sales and book values

Orient Paper is currently trading at only $4.4/shr which is well below their sales of $8.5/shr and their book of of $5.0/shr.  Its numbers are among the best in the paper industry as stated in the last quarterly earning release:

Second Quarter 2010 Highlights and Recent Events
-- Revenue increased 70.8% to $38.3 million
-- Gross profit increased 129.9% to $9.1 million -- Gross margin increased 610 basis points to 23.9%
-- Operating income increased 100.5% to $7.4 million
-- Excluding the $1.1 million non-cash charge related to the disposal of property, plant and equipment, non-GAAP operating income increased 129.8% to $8.5 million, or 22.2% of sales (*)
-- Net income increased 116.3% to $5.4 million, or $0.30 per share
-- Excluding the $1.1 million non-cash charge related to the disposal of property, plant and equipment, non-GAAP net income increased 160.0% to $6.4 million, or $0.36 per share (*)
-- Digital photo paper sales quantity reached 102 tons during the month of June 2010

"We achieved strong revenue and earnings growth during the second quarter," commented Mr. Zhenyong Liu, Chief Executive Officer. "Our performance was driven by increased pricing in both our medium-grade offset printing and corrugating medium paper businesses, a significantly higher volume of sales in our medium-grade offset printing paper business, and the contribution made by our new digital photo paper business. We are also very pleased with our bottom line performance, which benefited from our strong sales growth, and the contribution of our higher margin digital photo paper business."

ONP is also growing fast with its future secure in the world's fastest growing market.  CEO Liu stated, "Due to the rapidly increasing prices of wood pulp and the government's environmental protection initiatives, the demand for medium-grade offset printing paper as a substitute for the high-grade printing paper that consumes wood pulp continues to exhibit robust growth. We are confident that the strong market demand, partly caused by the government-mandated elimination of inefficient capacities, may continue into the second half of the year."

ONP's stock price is currently near its all time low and ONP's price per earning is the lowest in its industry.  This is expected to correct itself soon, especially now that Muddywaters has withdrawn their false allegations and moved on.  The target price is $15-16 in a year.

Disclosure: Long ONP