Measured Approach

SORL AUTO PARTS, INC. (NASDAQ:SORL) Data as of: January 8, 2010

Industry: Auto & Truck Parts

Current Data
Current Price $10.31 PEG 0.9
Market Cap ($M) $188.5 EPS TTM ($) $0.52
Shares Outstanding (M) 18.2 P/E TTM 19.8X
Institutional Holdings % 6.9% EPS Estimated 2009 ($) $0.59
Insider Holdings % 62.1% P/Estimated EPS 17.6X
Beta 2.35 MA Value ($) $22.0
0
Latest Quarter Reported 09/30/200 Dividend Yield % 0.0%
9

Based on filings with the Securities and Exchange Commission (SEC),

through its 90% ownership of the Ruili Group Ruian Auto Parts Co.,
Ltd., a sino-foreign joint venture (the "Joint Venture"), SORL Auto Parts,
Inc. (the "Company") develops, manufactures and distributes
automotive air brake valves and related components to automotive
original equipment manufacturers, or OEMs, and the related
aftermarket both in China and internationally. Installed on the chassis,
air brake valves include a collection of various air brake components
using compressed air and functioning as the execution device for
service braking and parking braking. The Company's products are
principally used in commercial vehicles weighing over three tons, such
as trucks and buses.

The company has an established sales network of 28 authorized

distributors throughout China selling to companies such as FAW
Qingdao Automobile Works, First Auto Group, Dongfeng Axle, Beiqi
Foton Motors, Zhucheng Automobile Works, and Liuzhou Special Auto
Manufacturing. The company’s major international customers include
Golden Dragon Auto Spare Parts, ITM, LIL/MILA, Makrotech, Polmo and
Fota.

Sorl seeks to expand its international customer base and has received
delegations from Brazil, India, Russia and the United States. The
company has four authorized sales centers in Australia, United Arab
Emirates, India and the United States with additional offices slated to
open. Sorl projects exports will increase by 30% in 2010.

By The Numbers

• The PEG ratio for SORL (0.97) is favorable. SORL seems valued
at a discount with one of the lowest PEG ratios in the Auto &
Truck Parts industry

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© Copyright 2009 Ronald Sommer. All Rights Reserved.
 • The average of the 1, 3, and 5 year EPS (basic) growth rates is a
healthy 29.2%
• Debt to Equity is 0.0%
• The average of the 1,3, and 5 year Revenue growth rates is a
string 23.83% and in line with the EPS growth rate
• Quarterly net Revenues are accelerating
• Quarterly EPS is accelerating
• Long-term debt ($0.00) is less than net current assets
• Both the Quick Ratio and the Current Ratio indicate financial
strength
• Inventory to sales grew to 14.59% in FY08 from 7.08% in FY07
(This is a negative)
• ROE declined to 10.3% in the TTM ending 9/2009 from FY08
15.2%
• SORL is doing a good job in comparison to its peers with a
Return on Assets, Return on Equity, and Revenues Per Employee
• SORL is one of the more profitable companies in the Auto &
Truck Parts industry with a net margin of 8.8%. Its operating
margin and net margin are among the strongest of any peer
while its gross margin is above the industry median

Conclusion
Sorl Auto Parts, Inc. is a strong candidate to play the industrial
expansion in China. Air brakes are a niche product but essential in the
manufacture of trucks and busses. The company is already the leading
manufacturer of air brakes in China. We rate SORL a buy at current
price levels.

Disclosure: Author has a long position in SORL.

Please visit http://measuredapproach.wordpress.com for important disclosures.

© Copyright 2009 Ronald Sommer. All Rights Reserved.