China Automotive Systems (CAAS) Misses Q4 EPS by 11c, Revenues Beat; Offers FY21 Revenue Outlook Below Consensus

China Automotive Systems (NASDAQ: CAAS) reported Q4 EPS of ($0.10), $0.11 worse than the analyst estimate of $0.01. Revenue for the quarter came in at $146.5 million versus the consensus estimate of $115.91 million.

Fourth Quarter 2020 Highlights

• Net sales rose 26.4% to $146.5 million from $115.9 million in the fourth quarter of 2019
• Gross profit increased 35.7% to $22.8 million from $16.8 million in the fourth quarter of 2019; gross margin increased to 15.6% compared with 14.5% in the fourth quarter of 2019
• An increase in general and administrative expenses was primarily due to a one-time, non-recurring $6.4 million expected credit loss provision related to the bankruptcy and reorganization proceedings of the Company's customer, Brilliance Auto
• Net loss attributable to parent company's common shareholders was $3.2 million, or diluted loss per share of $0.10, compared to net income of $1.7 million, or diluted income per share of $0.06, in the fourth quarter of 2019. Included in the net loss for the fourth quarter of 2020 was a non-recurring $4.5 million expected credit loss provision, net of minority interests.

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "The automobile industry in China suffered in the first half of 2020 due to the COVID-19 pandemic. Nevertheless, with a strong rebound beginning in the late second quarter, the world's largest auto market staged a remarkable comeback with total annual automobile sales down only 1.9% for the full year 2020. Passenger vehicles sales declined by 6.0% year-over-year while the commercial vehicle market achieved an 18.7% year-over-year growth including a 21.7% increase in truck sales due to higher infrastructure spending and the introduction of a new emission standard. We have participated in the commercial vehicle growth as we registered a record monthly sales of 70,000 units of commercial vehicle steering systems in November alone. Our growth in the Chinese commercial vehicle market remains strong in early 2021. We continued to maintain strong relationships with our large North American OEMs and in South America and believe 2021 will be an even better year."

"New energy vehicle (NEV) sales in China grew by approximately 11.0% to nearly 1.4 million vehicles in 2020 and the government's target is to have NEVs account for 20% of auto sales by 2025. We shipped over 120,000 units of our electric power steering ("EPS") for Chinese new energy vehicles in 2020. The major Chinese OEMs used our EPS products in 2020, including Great Wall Motors, Chery Automobile, BAIC, JAC Motors and Dongfeng Motor as well as emerging full-electric vehicle OEM Hozon Motors, which laid a solid foundation for our EPS products to gain greater market share in China."

"We continue to emphasize new technologies and products. To improve penetration into the Chinese new energy vehicle space, our Henglong KYB joint venture is further advancing our EPS technology to better empower the Chinese electric vehicle market. And our Hyoseong (Wuhan) joint venture with Hyoseong Electric Co. Ltd. began manufacturing small electric motors which will further improve the capabilities of our EPS to address the needs of electric vehicles. To embrace the future of autonomous-driven commercial vehicles, our proprietarily designed intelligent RCB steering systems ("iRCB") are being mass-produced and undergoing testing, and they have drawn interest from a list of large Chinese OEMs," Mr. Wu concluded.

Mr. Jie Li, chief financial officer of CAAS, commented, "Despite of pandemic induced challenges, we increased our cash flow from operations by almost 90% in 2020 compared with 2019. We continued to maintain our financial strength as we increased our cash, cash equivalent and short-term investments, and controlled inventory and receivable levels. During 2020, we purchased 322,269 of our common shares in the public market to enhance our shareholder value."

GUIDANCE:

China Automotive Systems sees FY2021 revenue of $470 million, versus the consensus of $475.12 million.

• Management provides revenue guidance for the full year 2021 of $470 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

For earnings history and earnings-related data on China Automotive Systems (CAAS) click here.

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