China lady shoe maker – Hongguo FY07 result

Total revenue +24.36%
Net Profit +21.56%
Operating cashflow before movement in working capital +21%
Earning per share (0.28 RMB) + 21.7%

Sales of C.Banner increased 21.38%
Sales of E.Blan increase 38.5%
Gross margin expanded to 40.57%

Profit before tax rose 18.28% dragged down by 50.17% increase of cost.

The bigger sales increase of E.Blan brand shows that the mid tier market expand more quickly. The black spot of this result is the fast expansion of cost. The group design output is increased to 6000 models per year. This couple with new retail information system and another 200 new outlets in year 2008 would further drive the earning forward. The joint venture company to produce Naturalizer and Via Spiga would also start contributing to earning.

The dividend payment is increased from 0.73 cents to 0.97 cents. The most comforting fact of Hongguo is it has achieved another year of 20% increase of profit. As long as you didn't buy expensive. This is a stock worth to keep. Assume they are able to increase the EPS to 0.336 next year. At the current price of 0.635, it is selling at next year PE of 9.4. BUY!