China BAK Battery, Inc, one of the largest manufacturers of lithium-ion battery cells in China and the world, as measured by production output, filed its Form 10-K Annual Report for fiscal year ended September 2007.
China BAK Battery, Inc., manufactures lithium ion rechargeable batteries in the People's Republic of China and world wide. The battery cells are the principal component of rechargeable lithium-based batteries used to power cellular phones, MP3 players, laptop computers, digital cameras, video camcorders, cordless power tools and other products using high-power lithium-phosphate batteries, such as miner's lamps, electric bicycles, and hybrid electric vehicles.
According to China BAK Battery, Inc.’s Form 10-K Annual Report rechargeable lithium-based battery cells, compared to other types of rechargeable battery cells based on nickel cadmium or nickel metal hydride chemistries, have a higher energy density, meaning a greater energy capacity relative to a given battery cell's weight and size. As a result, use of lithium-based batteries has risen significantly in portable electronic products.
Revenues for the year increased an anemic 1.4%, from $143.8 million to $145.9 million. Income before taxes decreased an alarming 80%, from $20.8 million to $288 thousand. This was due in great part to a significant 35.4% increase in the cost of revenue. Cash flow from operations less capital expenditures for 2007 was a negative $45.8 million. In addition the Company borrowed an additional $17.8 million for the year: a 62% increase and Cash has decreased from $34.1 million in 2006 to $18.8 million in 2007: a 47% decline.
Everyone is aware of how well the Chinese stock market has performed the past year pushing valuations to manic levels (batteries aren’t the only things that need lithium!) China BAK Battery stock price is no exception. It stock trades at a sky-high P/E multiple of 520 at a $5.25 closing price. Should a company with revenue decline of 1.4% and a whopping earnings decline of 80% be selling at a lofty Price Earnings multiple of 252? It seems that China BAK Battery Inc.’s batteries aren’t the only thing that needs recharging. When the Chinese market euphoria subsides and companies stock prices are based on their business fundamentals rather than irrational speculation the stock price of China BAK Battery Inc. could conceivably trade at a P/E multiple of 25 to 50 which would bring the stock down to the $0.50 to $1.00 price range. If you’re looking for alternative energy stocks you might want to look for an alternative stock to invest in.
http://www.bak.com.cn/
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