China TechFaith Wireless posts Q4 profit above the Street
China TechFaith Wireless Communication Technology Ltd. (Nasdaq: CNTF) reported a profit for its fourth quarter after the close yesterday that beat the consensus on Wall Street, and guided for first-quarter revenues above the Street.
The original developed product (ODP) provider focused on research and development of cell phones attributed its strong results to transitioning to an ODP provider model and progress on the development and production of middle to high end and tailor-made handsets.
“In our view, China TechFaith’s successful transition to an ODP model has become a key differentiating factor among Chinese companies on the handset value chain,” Susquehanna Financial analyst Adele Mao wrote in a research note this morning.
China TechFaith specifically noted that it launched 51 ODP models, including multimedia phones and dual mode dual card handsets consisting of multiple wireless technology combinations, as well as Windows-based smartphones and Pocket PC phones.
For the three months ended Dec. 31, 2007, the Bejing-based small cap recorded net income of $3.2 million, or $0.07 per American depository share, compared with a net loss of $6.7 million, or $0.15 per American depository share for the fourth quarter of 2006. The Thomson Financial mean estimate was for a net profit of $0.04 per share.
Net revenues for the quarter surged 56.7% to $45.7 million, from $29.1 million for the same quarter last year due to stronger-than-expected performance of the ODP business.
“The fourth quarter of 2007 was a clear indication that China TechFaith has emerged as a much stronger franchise poised for earnings growth in 2008 … with improved customer mix and a strong pipeline in the feature phone and Smartphone businesses,” wrote Mao.
Looking ahead to the first quarter of 2008, despite seasonality generally incurred in the first quarter due to the Chinese New Year and the severe snow storms in China at the end of January, China TechFaith said it expects “sustained profitability.” The small cap is calling for revenues for the first quarter to be in the range of $48 million to $49 million, above the consensus of three analysts surveyed by Thomson Financial of $42.86 million.
“China TechFaith is back on the track of profitable growth in 2008, and 3G as well as new initiatives in mobile gaming could provide further growth potential in 2009 and beyond,” Mao wrote. According to the analyst, China TechFaith expects to ship 3G handsets and data cards in the second quarter of 2008.
Mao raised her 2008 revenue estimate to $217 million from $212 million and raised her 2008 EPS estimate to $0.34 from $0.25. The consensus of five analysts polled by Thomson Financial is for earnings of $0.35 per share on revenues of $221.46 million.
Commenting on the year ahead, the company said it expects to maintain a fast growth rate for the year while continuing to focus on its cost structure.
The firm also offered reassuring remarks on its position in the macroeconomic environment. China TechFaith said it does not expect a near-term slowdown based on its position in the handset value chain. The company said it believes there is increasing demand for middle to high-end and tailor made handsets from China and the international handset market.
Shares of China TechFaith Wireless Communication (CNTF) advanced 21.8%, or $1.14, to $6.37 on heightened volume of 1,347,776 shares at 10:18 a.m. ET. Shares of China TechFaith Wireless Communication have been trading in the range of $3.40 to $10.03 for the past 52 weeks. Typical volume for the stock is 264,237 shares.
