After posting a 24% increase in sales in the second quarter, the big question now is whether Sorl Auto Parts, Inc. (NASDAQ:SORL) will continue to trade higher in the market. The stock has been on an impressive run in recent week, prompting a buy rating from Zack Investment.
Fueling investor interest on the stock, after the sales beat, is the amount of growth Sorl Auto Parts is set to experience in China. Sales growth in the quarter outperformed the overall commercial vehicle growth allowing the company to bolster its market share in the country.
“We continue to benefit from our ongoing development of new products and systems to capture new market opportunities and win new customers,” said Chief Executive Officer Mr. Xiaoping Zhang.
The impressive performance in the quarter came at the back of a slowdown in the Chinese economy. Growth in the overall economy should unlock further opportunities that Sorl Auto Parts can take advantage of as it continues to look for new sales channels for its products. The company has already confirmed that it is developing new products for the end markets that should benefit from the Chinese government policies.
Focusing On China
Focusing on China appears to be the company’s big play with efforts on this front already paying off given the target market in the world’s populous nation. Revenues from domestic OEM customers was up by 29.2% in the quarter even as the overall Chinese economy continued to grapple with uncertainty. Generating $25.92 million in revenues from the domestic market in a tricky quarter underscores the amount of room for growth in store as the Chinese economy returns to growth.
However, the major risk to Sorl Auto Parts, Inc. (NASDAQ:SORL) growing its bottom line is the challenges it continues to face on the international scene. Revenues on international markets were down by 10.1% to $12.5 million, on lower truck production and currency depreciation.