Lihua Intl (NASDAQ:LIWA)

First Quarter 2012 Financial Highlights

• Sales increased 23.5% year-over-year to $169.1 million.
• Gross profit increased 10.2% year-over-year to $18.6 million.
• Net income was $11.5 million, or $0.38 per diluted share, compared with $12.5 million, or $0.41 per diluted share in the first quarter of 2011.
• Non-GAAP net income(1) was $11.8 million, or $0.39 per diluted share, compared with $11.1 million, or$0.37 per diluted share in the first quarter of 2011.
• Adjusted EBITDA(2) was $16.7 million, compared with $15.7 million in the first quarter of 2011.
• Strong balance sheet with $108.0 million in cash and cash equivalents, or $3.59 per diluted share, as ofMarch 31, 2012, compared with $105.6 million as of December 31, 2011.
• Cash flow from operations of $6.7 million, compared with cash flow from operations of $1.3 million in the first quarter of 2011.

"Our first quarter results reflect the strength of our business, the sizeable market opportunity for our products and the success of our efforts to maximize output through innovation and efficiency improvement initiatives. We increased total sales volume nearly 50% over the first quarter of 2011 and grew revenue over 23%, despite ASP pressure caused by a decline in the average price of copper. Our ability to generate such a sizeable increase in sales volume during what is usually a slow quarter due to the Chinese New Year speaks to the significant, unmet demand for our products," said Mr. Jianhua Zhu, Lihua's founder, chairman and CEO. "Market response to our copper rod product, which was re-introduced in the fourth quarter following the doubling of capacity on our dedicated smelter, has been enthusiastic and we expect that copper rod will be an important contributor to our revenue, gross profit and net income growth in 2012. Moreover, we further strengthened our balance sheet with operating cash inflow of $6.7 million, bringing our total cash position at the end of Q1 to approximately $108 million, an increase of nearly $18 million over March 31, 2011, which will be used to accelerate investment in Lihua's longer-term growth initiatives.

"In addition to our strong financial performance, we began the pre-heating process on the two new smelters at our facility on May 3rd. As it normally requires one month of pre-heating before we can commence volume production, we expect to fully ramp production on these smelters in early June, increasing copper anode production capacity to 85,000 - 95,000 tons and total refined copper production capacity to 135,000 - 145,000 tons per year. These ongoing efforts to maximize output are becoming increasingly important as we work to address the needs of China's copper consumers. With this new capacity on line, we are well positioned to capture additional market share in our existing businesses while accelerating the construction and development efforts for our upcoming CCA cable and wire products, which will gain us entry into the large, highly lucrative power transmission cable and wire market. We are poised for continued growth in 2012, and maintain our expectation for gross profit of $93-96 million and non-GAAP net income of$61-64 million for the year, representing an increase of 23-27% and 22-28%, respectively, over 2011."

Outlook

At the conclusion of the one-month pre-heating period that began on May 3, 2012, the Company expects to ramp production on its two new copper anode smelters in early June 2012, increasing copper anode capacity to 85,000 - 95,000 tons per year. Additional construction on the Company's 30-acre plant site is scheduled for completion in 2013, and will include warehouse and storage facilities, production facilities for the Company's new CCA power transmission cable and wire products, a new R&D center, office space and employee facilities.

The Company has reiterated its full-year 2012 guidance, which calls for gross profit to be between $93-96 million, and non-GAAP net income between $61-64 million, representing year-over-year growth of 23-27% and 22-28%, respectively. The Company expects that 2012 growth will be largely the result of this additional capacity and continued strong demand in China for recycled copper and copper alternative products in end markets that include household appliances, consumer white goods and infrastructure.

Mr. Zhu concluded, "Our first quarter performance and the recent steps we have taken toward opening our new copper anode production facility have set the stage for continued success in 2012 and further into the future. While we faced a few days of delay in the launch of the new facility due to China's Labor Day holidays at the beginning of May, we are pleased to have the pre-heating process underway and are prepared to ramp production in June, allowing us to focus on other strategic growth initiatives including the installation of production equipment, test production, marketing and commercialization of our CCA cable and wire products for power transmission. We believe that this new CCA product could have as significant an impact on our business and end markets as copper anode did upon its introduction. We look forward to its launch, which is currently targeted for the second half of 2013. With our leadership position in the markets we serve, robust cash position and strong product portfolio and pipeline, we are confident in our ability to continue growing Lihua's business in new and existing markets."

DANYANG, China, April 9, 2012 /PRNewswire-Asia/ -- Lihua International, Inc. (NASDAQ: LIWA) ("Lihua" or the "Company"), a leading Chinese developer, designer, and manufacturer of low cost, high quality alternatives to pure copper products, including refined copper products and superfine and magnet wire, as well as copper clad aluminum ("CCA") wire, today announced that it is on track to commence production of copper anode on its two new smelters by the end of April. The construction team is currently completing the connection of the recycling system to the smelters and the dedicated power grid. Each of these smelters will add 25,000-30,000 tons of copper anode capacity on an annualized basis, giving Lihua a total of 85,000-95,000 tons of copper anode capacity per year and a total of 135,000 - 145,000 tons of refined copper production capacity per year.

"Despite the recent weakness in Lihua's share price, there have been no developments within the Company that would warrant this level of volatility. On the contrary, our business has never been stronger," said Mr. Jianhua Zhu, Lihua's Chairman and Chief Executive Officer. "Demand from our primary copper anode customers continues to grow, and the volume demand from our largest customer alone already exceeds our post-expansion production capacity. Several weeks ago, we reported record results for 2011 and guided for year-over-year growth of more than 20% in both gross profit and non-GAAP net income in 2012. We remain confident in Lihua's growth prospects and the fundamental strength of our business. With a number of catalysts that we expect will begin having a positive effect on our business in the near future, as well as continued support from our loyal investors, we believe that our Company's valuation can become more aligned with and better reflect the strength of our business."

Lihua carefully monitors its stock's trading patterns. The Company is currently reviewing recent unusual trading activity and plans to report any suspicious activity to the U.S. Securities and Exchange Commission, as appropriate.

Lihua reiterated its financial guidance for full-year 2012 gross profit to be between $93 million and $96 million, and non-GAAP net income between $61 million and $64 million, representing year-over-year growth of 23-27% and 22-28%, respectively. The Company expects that 2012 growth will be largely the result of continued strong demand in China for recycled copper and copper alternative products in the overall copper consumption market including the household appliance, consumer white goods and infrastructure markets, as well as the increase in production capacity. In addition, the Company will distribute its second special dividend of $0.03 per share on April 13, 2012 to shareholders of record as of March 31, 2012.

Fourth Quarter 2011 Financial Highlights

• Sales increased 31% year-over-year to $177.6 million.
• Gross profit decreased 5% year-over-year to $19.7 million.
• Net income increased 29% to $12.7 million, or $0.42 per diluted share, compared with $9.9 million, or $0.33per diluted share in the fourth quarter of 2010.
• Non-GAAP net income(1) was $12.8 million, or $0.43 per diluted share, compared with $13.4 million, or$0.44 per diluted share in the fourth quarter of 2010.
• Adjusted EBITDA was $18.0 million, compared with $18.8 million in the fourth quarter of 2010.(2)
• Strong balance sheet with $105.6 million in cash and cash equivalents, or $3.52 per share, as of December 31, 2011, compared with $90.6 million as of December 31, 2010.
• Cash flow from operations of $11.9 million, compared with cash flow from operations of $2.4 million in the fourth quarter of 2010.

Balance Sheet

As of December 31, 2011, Lihua had $105.6 million, or $3.52 per share in cash and cash equivalents, compared with $90.6 million as of December 31, 2010. As of December 31, 2011, Lihua had working capital of $157.9 million and no debt.

Outlook

The Company expects to complete the addition of two smelters by end of April 2012. Once complete, the two new smelters will add additional 50,000 tons of annual production capacity for copper anode. The remainder of the construction of the entire approximately 30-acre new plant site is expected to be completed in year 2013. Production capacities for our new CCA cable and wire product is expected to be added in the second half of 2013.

The Company expects full-year 2012 gross profit to be between $93 million and $96 million, and non-GAAP net income between $61 million and $64 million, representing year-over-year growth of 23 - 27% and 22 - 28%, respectively. The Company expects that 2012 growth will be largely the result of continued strong demand inChina for recycled copper and copper alternative products in the overall copper consumption market including the household appliance, consumer white goods and infrastructure markets, as well as the increase production capacity.

"In 2012, as we accelerate our expansion, we expect continued capital expenditures needed to continue the build-out of the facilities at our 30-acre site," Mr. Zhu continued. "We expect additional capital spending of $35 - $40 million relating to the installation of the new CCA production equipment and completion of the build out of the entire plant site. We believe that our existing cash, cash equivalents and cash flows from operations will be sufficient to meet our expected Capex requirements. We also expect an increase in working capital needs as a result of the anticipated capacity increase in our copper anode operation, and our forthcoming CCA cable and wire products."

To our Shareholders, Partners and Friends:

2011 was a year of positioning and progress, during which Lihua achieved tremendous growth financially, operationally and strategically. We achieved significant top and bottom line growth as our copper anode and wire products continued to gain momentum through robust customer demand. Although we faced certain obstacles that impeded our growth in the fourth quarter of the year, we took proactive steps to address these challenges and entered 2012 in what we believe is an ideal position for growth and success over the longer-term. I would like to take this opportunity to review some of our 2011 highlights and share with you the reasons for our enthusiasm in 2012.

Strong Top Line Growth Driven by Copper Anode:

During the first nine months of 2011, Lihua achieved record revenue of $459.5 million, an increase of 95.5% year-over-year, compared with revenue of $235.1 million in the first nine months of 2010. Copper anode continued to be our primary growth driver, with sales reaching $217.9 million or more than 47% of total revenue, compared with sales of $35.7 million in the first nine months of 2010. Since launching the product in the third quarter of 2010, we have built copper anode into a sizable business, and with our new copper recycling facility nearing volume production, we are poised to capture even greater share of this large and growing market.

Update on New Facility Construction and Operation:

As we have discussed previously, we began construction on our new manufacturing facility in late 2010, in an effort to increase Lihua's share of the burgeoning pure copper market. While our construction crews worked tirelessly throughout 2011, severe weather in the summer months forced us to suspend construction, while subsequent equipment installation delays pushed the opening of the new facility into the New Year. The two 25,000 ton smelters have been constructed and installed, and the connection of the smelters to our new state-of-the-art environmental and recycling systems is being completed. The final step required before we can ramp production to the designed capacity of 50,000 tons per year is the connection of the facility to a newly constructed electrical grid, which will provide direct power to the plant and manufacturing equipment. We have begun making these connections and expect to complete this process by the end of April, once the ground has thawed, barring any unexpectedly heavy rainfall in the early spring. We are confident that this additional capacity will have an immediate positive impact on our business, allowing us to more effectively address customer demand.

In addition, we are working to develop the rest of the 30-acre site through the construction of additional factory buildings, warehouse capacity and administrative facilities. We expect to complete the build-out of the entire site by end of 2012, and believe that the development of these assets will give us the operational flexibility needed to further expand our product portfolio and improve our competitive position ahead of the next phase of copper growth.

Full letter

It appears that LIWA has officially abandoned its share repurchase program:

In January 2011, the Board of Directors had approved a $15 million share repurchase program (the “Repurchase Program”) for the Company. The Company has since purchased 264,047 shares in the open market at aggregate cost of $2.1 million. The initial repurchases were funded with US dollars the Company had in its Hong Kong bank account, and the subsequent repurchases were funded by an aggregate of $1.3 million loans, denominated in U.S. dollars, from Magnify Wealth Enterprise Limited (“Magnify Wealth”), a British Virgin Islands corporation and an entity affiliated with Mr. Jianhua Zhu, our CEO and Chairman. The Company repaid Magnify Wealth in full, in RMB. While the Company’s operating subsidiaries in the PRC have substantial cash reserves available, the laws of the PRC restrict the conversion of RMB to U.S. dollars, such that the Company has encountered difficulty funding the Repurchase Program with U.S. dollars from cash held by its PRC subsidiaries. The Company explored possible alternative arrangements for funding the Repurchase Program in U.S. dollars with financial institutions, but Company management determined that such alternatives would have been costly or otherwise not appropriate for the Company.

Third Quarter 2011 Results

NEW YORK & SHANGHAI--(BUSINESS WIRE)--China 360° Solutions, LLC, a New York- and Shanghai-based forensic due diligence, strategic communications and financial advisory firm for U.S. listed Chinese companies, announced today that it is providing additional and supplementary information with respect to its independent forensic due diligence report on Lihua International, Inc. (NASDAQ: LIWA) released publicly on August 11, 2011.

The China 360° Investigative Report was generated by a senior team of China 360° forensic accountants and support personnel who received the full cooperation of Lihua executive management and employees and were given access to the company’s books and records while onsite at Lihua’s operating facilities in China.

The comprehensive report details a variety of findings, including validity of the company’s licenses and certifications, verification and reconciliation of tax reports to published financial reports, customer and supplier verifications, facility reviews, and related party analysis, among others. The original report is available here.

The supplement, released today and which is available by clicking here, details additional procedures China 360° performed related to previous findings reported under the headings “Tax Reconciliation” and “Channel Check” in the Original Report. The supplement is not intended to be a comprehensive analysis of the Company, and should be read in conjunction with the Original Report.

DANYANG, China, July 7, 2011 /PRNewswire-Asia/ -- Lihua International, Inc. (Nasdaq: LIWA) ("Lihua" or the "Company"), a leading Chinese developer, designer, and manufacturer of low cost, high quality alternatives to pure copper products, including refined copper products and superfine and magnet wire, as well as copper clad aluminum ("CCA") wire, today announced that it has filed with the China State Administration for Industry and Commerce ("SAIC") its 2010 financial reports for its subsidiaries, Lihua Copper and Lihua Electron. The reports and SEC reconciliations are available on the "Financial Information" page of Lihua's Investor Relations website at: www.lihuaintl.com.

The Company filed its reports with the SAIC via a secure, electronic database and has received confirmation of receipt from the SAIC. As is customary, access to this secured database is shared with other tax authorities, including the State Administration of Taxation ("SAT"), for annual review and inspection.

Lihua's SAIC reports were prepared in accordance with Chinese accounting rules and policies, and reflect financial information relating to Lihua Electron and Lihua Copper on an unconsolidated basis. Upon confirmation of receipt from the SAIC, Lihua posted on its website scanned copies of its subsidiaries' 2010 SAIC reports, as well a table reconciling the major Income Statement items of the Company's 2010 annual report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 14, 2011.

Downloadable copies of the Company's 2010, 2009 and 2008 SAIC reports and reconciliation tables are available on the "Financial Information" page of Lihua's Investor Relations website.

Red Flag Alert

On May 19, 2011, Magnify Wealth Enterprise Limited (“Magnify Wealth”), a British Virgin Islands Corporation and an entity affiliated with Jianhua Zhu, the Chief Executive Officer and Chairman of Lihua International, Inc. (the “Company”), agreed to loan the Company up to $4 million pursuant to the terms of a demand promissory note (the “Note”) to partially fund the Company’s previously announced $15 million stock repurchase program to make open market purchases of the Company’s common stock (the “Repurchase Program”). While the Company’s operating subsidiaries in the People’s Republic of China (the “PRC”) have substantial cash reserves available, the laws of the PRC restrict the conversion of Chinese Renminbi (“RMB”) to US dollars, such that the Company has encountered difficulty funding the Repurchase Program with US dollars from cash held by its PRC subsidiaries. The Company explored possible alternative arrangements for funding the Repurchase Program in US dollars with financial institutions, but Company management determined that such alternatives would have been costly or otherwise not appropriate for the Company.

On May 23, 2011, Magnify Wealth loaned $1 million under the Note, which amount the Company repaid in full on May 25, 2011 in RMB. On June 14, 2011, Magnify Wealth loaned $300,000 under the Note, which amount the Company repaid in full on June 14, 2011 in RMB. The total amount repaid was RMB 8,434,660, which was repaid at the average rate of 6.4822 RMB per US dollar, which was based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and has an interest rate of 2% per annum. A copy of the Note is attached as Exhibit 99.1 of this Current Report on Form 8-K.

DANYANG, China, June 22, 2011 /PRNewswire-Asia/ -- Lihua International, Inc. (Nasdaq: LIWA) ("Lihua" or the "Company"), a leading Chinese copper and alternative copper products company, today announced that it has received an Environmental Import License from the Ministry of Environmental Protection of the People's Republic of China (PRC). As the Company had previously disclosed, Lihua received a Scrap Metal Import License from the General Administration of Quality Supervision, Inspection and Quarantine of the PRC in November 2010.  Together, these licenses enable Lihua to begin purchasing and importing scrap copper directly from overseas suppliers.

Lihua expects that importing scrap copper directly, rather than purchasing from domestic importers, should provide the Company with material cost savings on scrap copper procurement. In anticipation of the receipt of these licenses, the Company has already placed initial trial orders with a few scrap copper suppliers in the U.S. and expects to begin purchasing from these suppliers during the third quarter of 2011.  The Company expects to ramp up its scrap copper imports to material volume by the end of 2011.

"As we continue working to expand the scale of our business and focus on increasing profitability, our ability to import scrap copper marks a significant milestone for Lihua," said Mr. Jianhua Zhu, Chairman and CEO of Lihua. "By making direct purchases from overseas suppliers, we believe that over time we can achieve considerable raw material cost savings, which we believe will drive incremental gains to our bottom line as we continue to expand our scrap copper refinery capacity."

In conjunction with the projected profitability improvement from importing scrap copper, as well as continued strong demand inChina for recycled copper and copper alternatives, Lihua has raised its 2011 gross profit guidance to be between $81.0 million and $83.0 million, and non-GAAP net income guidance to be between $53.0 million and $55.0 million, representing year-over-year growth of 30.4-33.7% and 32.2-37.2% respectively.

The Company also provided an update on its previously announced $15 million share buyback program.  Under this program, Lihua has purchased over 264,000 shares, or over $2 million of common stock, in the open market as of June 21 2011. Lihua plans to continue making purchases under this program as regulations and market conditions allow.

As of March 31, 2011, Lihua had $90.7 million, or $2.99 per diluted share, in cash and cash equivalents. While the Company's strong balance sheet reflects substantial cash reserves, the currency regulatory agency in PRC has annual amount limitations on an entity's ability to convert Chinese RMB to U.S. dollars for use overseas, unless this money is used for normal business operations. Due to these restrictions and to accelerate the Company's ability to continue to purchase shares under its share buyback program, Lihua has entered into a promissory note agreement (the "Note") for up to U.S. $4 million with Magnify Wealth Enterprise Limited, an entity affiliated with Mr. Jianhua Zhu, Chairman and CEO of Lihua. Repayment of the Note is to be made by the Company's PRC operating subsidiary in RMB at the prevailing conversion rate at the time of repayment. Lihua's Audit Committee and Board of Directors have reviewed and approved the Note and the payment arrangement related to partial funding of the share buyback program.  

Under this agreement, Magnify Wealth has loaned $1.3 million to Lihua to-date, which the Company's PRC operating subsidiary has already repaid in full in RMB.  In addition, to fund the initial share buyback Lihua has used approximately $1 million of the U.S. currency it had in its Hong Kong bank account.

This transaction was determined to be the most suitable and cost effective solution for securing U.S. currency to continue purchasing shares under the Company's share buyback program. Lihua is exploring additional alternatives to complete the remainder of its $15 million Share Repurchase Program.

In addition to its share buyback program, Mr. Zhu, through his affiliated entity Magnify Wealth, has purchased 125,000 shares in the open market as of June 21, 2011, and intends to continue to purchase shares.  

Mr. Zhu added, "Our management and Board are committed to the further creation of shareholder value and the Company will continue to seek additional opportunities to increase shareholder returns."

Rodman and Renshaw on LIWA                        6/22/2011

LIWA Receives Copper Import License; Raises FY11 Guidance.

Lihua International, Inc. (LIWA) announced that it was granted an Environmental Import License from the PRC Ministry of Environmental Protection. The license comes in addition to the Scrap Metal Import License received by the company in November 2010. The two licenses will enable the company to purchase scrap copper, the main raw material for copper wire and anode products, directly from the overseas suppliers bypassing the middlemen typically involved in such transactions. The company revised up its previously issued guidance for the current year from $80-$82 million in gross profit and $52-$54 million in non-GAAP net income to $81-$83 million in gross profit and $53 - $55 million in non-GAAP net income, respectively. The stock is currently trading at 4x and 3x our fully diluted EPS estimates of $1.79 for FY11 and $2.36 for FY12. Given the company’s consistent financial performance, strong cash position ($2.99 per fully diluted share at the end of 1Q11), planned capacity expansion and its commitment to transparency, we view the stock as one of the most attractive value propositions in the small-cap China space. We reiterate our Market Outperform/Aggressive Risk rating and a price target of $18 based on the shares attaining a P/E multiple of 10x our FY11 fully diluted EPS estimate.

Impact on Earnings

Management estimates that copper import licenses will reduce its scrap copper procurement costs by approximately $150/MT. Given that the company does not expect a ramp up in imports until the end of FY11 and the fact that it will likely continue to purchase scrap copper from the domestic suppliers in smaller quantities on as needed basis, we are modeling a conservative increase in 4Q11 and FY12 gross profit. We are increasing our 4Q11 gross profit forecast from $27.1 million to $28.3 million, with the full year gross profit and net income expected to come in at $81.3 million and $54.2 million or $1.79 per fully diluted share, respectively. We are also raising our net income estimate for FY12 from $65.2 million or $2.14 per fully diluted share to $72.1 million or $2.36 per fully diluted share based on a $9.2 million increase in our gross profit forecast to $111.6 million due to lower anticipated cost of scrap copper.

Risks

(1) Market Risk (2) Macroeconomic risks (3) Fluctuating copper prices (4) Availability of scrap copper (5) Delays in the construction of the second copper recycling facility (6) New product commercialization.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

DANYANG, China, June 3, 2011 /PRNewswire-Asia/ -- Lihua International, Inc. (Nasdaq: LIWA) ("Lihua" or the "Company"), a leading Chinese developer, designer, and manufacturer of low cost, high quality alternatives to pure copper products, including refined copper products and superfine and magnet wire, as well as copper clad aluminum ("CCA") wire, today announced that the Company expects to file its 2010 reports for its subsidiaries, Lihua Copper and Lihua Electron, to the China State Administration for Industry and Commerce ("SAIC") in June 2011. The Company electronically files its two subsidiaries' annual SAIC reports to a secured SAIC database. As is customary, the secured SAIC database is shared with other tax authorities including the State Administration of Taxation ("SAT"), for annual review and inspection.  

Each of the Company's wholly owned subsidiaries, Lihua Electron and Lihua Copper, makes quarterly estimated SAT tax payments, and finalizes / trues up any additional tax payments (if needed) once the SAT performs its annual tax review and inspection based on PRC-audited financials of each subsidiary, which are a part of the annual SAIC reports.

Once filed, scanned copies of the subsidiaries' 2010 annual SAIC reports, as well as a reconciliation table to the major Income Statement items of the Company's 2010 SEC 10K filing, will be made available to investors on the "Financial Information" page of the Company's investor relations website athttp://www.lihuaintl.com/Investor_Relations/Financial_Information.html. Downloadable copies of the Company's 2009 SAIC reports and reconciliation table remain available on this section of Lihua's website.

Lihua also announced that a corporate overview video providing information on the Company's history, present business and outlook for the future has been posted to its homepage at http://www.lihuaintl.com. Additionally, archived video footage and downloadable presentation materials from the Company's May 24, 2011 investor and analyst day are available under the "Events and Presentations" section of Lihua's website athttp://www.lihuaintl.com/Investor_Relations/Events_Presentations.html.

Rodman and Renshaw on LIWA                            5/11/2011

LIWA Delivers Another Strong Quarter.

Lihua International, Inc (LIWA) reported a strong 1Q11 quarter with revenues increasing 116.6% YoY to $136.9 million on higher volumes and average selling prices. GAAP net income came in at $12.5 million (~up 41.3% YoY) or $0.41 per fully diluted share versus our estimates of $11.1 million or $0.37 per fully diluted share. Excluding $1.4 million in non-cash gains related to the change in the fair value of warrants and the extinguishment of warrant liabilities, the company reported non-GAAP net income of $11.1 million (~ up 50.2% YoY) or $0.37 per fully diluted share. The company reiterated its previously issued FY11 gross profit and non-GAAP net income guidance of $80.0 million to $82.0 million and $52.0 and $54.0 million, respectively. The stock is currently trading at 5x and 4x our fully diluted EPS estimates of $1.77 for FY11 and $2.14 for FY12. Given the company’s consistent financial performance, strong cash position ($2.99 per fully diluted share at the end of 1Q11), planned capacity expansion and its commitment to transparency, we view the stock as one of the most attractive value propositions in the small-cap China space. We reiterate our Market Outperform/Aggressive Risk rating and a price target of $18 based on the shares attaining a P/E multiple of 10x our FY11 fully diluted EPS estimate.

Discussion:

• Strong Performance across Product Lines: Revenues from copper-clad aluminum (CCA) wire increased 26.0% YoY to $16.5 million, accounting for 12.1% of the total revenues in 1Q11 (Exhibit 1: Revenue Breakdown in 1Q11). Sales of copper wire grew 96.4% YoY to $54.0 million or 39.6% of total revenues on substantially higher volumes and selling prices. Copper anode, a new product introduced in the 3Q10, accounted for nearly half of the total sales for the quarter. Selling prices rose across the board on higher copper prices (Exhibit 2: Average Selling Prices per Ton by Product Line) with the average price per ton increasing by 21.0% YoY and 14.1% QoQ to $9,964.
• Gross Profit Up 69.9% YoY despite Margin Compression: The company reported 1Q11 gross profit of $16.9 million (versus our forecast of $17.0 million) compared to $11.8 million in 1Q10. The overall gross margin declined from 18.7% in 1Q10 to 12.3% in 1Q11 on higher copper prices and a shift in product mix towards lower margin copper anode. We maintain that lower gross margins are not indicative of poor performance. Because the company prices its products on a cost plus basis charging a fixed dollar mark-up or processing fee per metric ton, gross margins tend to fall when copper prices are going up and expand when copper prices are going down while per ton mark-ups or gross profits in dollar terms remain fairly stable. During 1Q11, average gross profit per ton declined from approximately $1,540/MT in 1Q10 and $1,332/MT in 4Q10 to $1,232/MT due to a decrease in CCA and copper wire gross profits per ton partially offset by higher gross profits per ton on copper anode sales (Exhibit 3 Gross Profit per Metric Ton by Product Line).
  
  
  Notice Regarding Privacy and Confidentiality:
  
  
  This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.
  
  Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.
  
  Rodman & Renshaw, LLC may make a market in the securities being discussed.
  
  Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).
  
  Member FINRA.
  Member SIPC.
  

First Quarter 2011 Financial Highlights

• Sales increased 117% year-over-year to $136.9 million.
• Gross profit increased 43% year-over-year to $16.9 million.
• Net income increased to $12.5 million, or $0.41 per diluted share, compared with $8.9 million, or $0.34 per diluted share in the first quarter of 2010.
• Non-GAAP net income(1) was $11.1 million, or $0.37 per diluted share, a 50% increase, compared with $7.4 million, or $0.28 per diluted share in the first quarter of 2010. Non-GAAP net income excludes charges related to the change in fair value and gain on extinguishment of warrants of $1.4 million and $1.5 million for the first quarter of 2011 and 2010, respectively.
• EBITDA increased 47% year-over-year to $15.7 million.(2)
• Strong balance sheet with $90.7 million in cash and cash equivalents, or $2.99 per diluted share, as of March 31, 2011, compared with $90.6 million as of December 31, 2010.
• Cash flow from operations of $1.3 million, compared with cash flow from operations of $9.4 million in the first quarter of 2010. The decrease in cash flow from operations was primarily attributable to increased inventories resulting from the expansion of production capacity and revenue growth, and increased accounts receivable driven by revenue growth.
• Reaffirms full-year 2011 guidance of $80-82 million gross profit and non-GAAP net income of $52-54 million, representing year-over-year growth of 29-32% and 30-35%, respectively.
• Lihua plans to file its 2010 State Administration for Industry and Commerce ("SAIC") financial filing in June 2011. The SAIC filing and reconciliation with its 2010 annual report on form 10-K will be posted to Lihua's website at that time. Lihua's 2009 SAIC filing and reconciliation are currently available on the Company's website.

Geoteam® Note: 2011 First quarter analyst EPS estimates were $0.40. 

"We continue to demonstrate robust growth across our core financial metrics. During the first quarter we achieved a new quarterly sales record of $136.9 million, representing 117% increase compared with last year and nominal sequential quarter growth, despite seasonal weakness associated with the Chinese New Year," said Jianhua Zhu, Chairman and Chief Executive Officer of Lihua. "Demand for our wire and refined copper products remains solid, with copper anode in particular representing a high growth commodity, as it accounted for nearly half of our revenue in the first quarter. The superior cost and quality of our copper anode product has drawn attention from a growing range of potential customers, including electrolytic copper producers, which have traditionally required products based on virgin copper. Although copper anode generates lower gross profit margins than our wire products, it has a higher return on invested capital as a result of its significantly shorter production cycle, enabling us to maximize the profit generated in a given period.

"We remain committed to the continued advancement of China's copper industry, and to further extending our leadership position in the market through ongoing innovation. Our recently-formed partnership with RIORE is expected to generate new, environmentally-friendly products, while increasing the sustainability of our operations. In addition, we are exploring partnerships with academic institutions and other industry groups, which will significantly bolster our R&D capabilities, enabling us to introduce new products that will increase Lihua's value proposition for customers and help build shareholder value."

Outlook

Lihua expects 2011

• gross profit to be between $80.0 million and $82.0 million 
• non-GAAP net income between $52.0 million and $54.0 million, 

representing year-over-year growth of 29-32% and 30-35%, respectively.

The Company expects that 2011 growth will be largely the result of continued strong demand in China for recycled copper and copper alternatives in the household appliance, consumer white goods and infrastructure markets.

Lihua's 2011 financial projections assume one quarter of production and sales contribution from its new copper recycling facility, which is currently under construction and due to commence production by the beginning of fourth quarter 2011. Guidance also excludes any favorable impact on cost of goods sold from the direct import of scrap copper that Lihua plans to undertake once it obtains the importers' license for which Lihua has applied. Lihua expects that launching production at its new facility ahead of the timeframe currently anticipated, or receiving its importers' license from the Chinese government would provide a positive impact on its current gross profit and non-GAAP net income expectations.

Mr. Zhu added, "2011 has gotten off to an excellent start for Lihua, both operationally and strategically. We continue to grow our business thanks to the sizeable end market demand for our products, while positioning the Company for further success in the long-term. Construction at our new copper recycling facility, which will double our production capacity to 100,000 tons, is proceeding according to plan, and we are making progress toward fulfilling the final requirement necessary for our import license. Each of these events represents a significant catalyst for Lihua, and they will be instrumental in taking the Company to its next level of operational and financial success."

DANYANG, China, March 23, 2011 /PRNewswire-Asia/ -- Lihua International, Inc. today announced that it has begun repurchasing shares under its $15 million stock buyback program under which the Company plans to utilize its cash on hand and operating cash flow for the repurchase of shares through January 26, 2012.

As of the close of trading on Tuesday, March 22, 2011, the Company had purchased approximately 55,500 shares at an average price of $9.61 through open market transactions.

Rodman and Renshaw on LIWA                                               3/17/2011

Update on 4Q10 Results and Site Visit

Lihua International reported 4Q10 and FY10 results in line with the previously issued preliminary financial results. Revenues for the 4Q10 and FY10 came in at $135.5 million (~up 164.3% YoY) and $370.5 million (~ up 129.4% YoY), substantially above our previously issued forecasts of $106.8 million and $341.9 million, respectively. Reported gross profit of $20.7 million in 4Q10 and $62.1 million in FY10 exceeded both our estimates of $17.5 million for 4Q10 and $58.9 million for FY10 and the company full year guidance of $57.0 - $60.0 million. The company reported net income of $9.9 million or $0.33 per fully diluted share for 4Q10 and $38.5 million for the full year. LIWA repeated its previously issued FY11 gross profit and non-GAAP net income guidance of $80.0 million to $82.0 million (~an increase of 29%-32% YoY) and $52.0 and $54.0 million (~ an increase of 30-35% YoY), respectively, citing continuous demand for its products and additional copper anode capacity coming online in the 2H11. Based on the company guidance, we are now forecasting $553.5 million in revenues, $80.7 million in gross profit and $53.1 million in net income, equivalent to fully diluted EPS of $1.77. We are maintaining our Market Outperform rating and a prices target of $18 based on the shares attaining a P/E multiple of 10x our FY11 fully diluted EPS estimate.

Key takeaways from our site visit: We have recently visited the company’s facility in Danyang and met with the company management including Mr. Jian Hua Zhu, the Chairman of Lihua International, Roy Yu, CFO; Ya Ying Wang, the company’s General Manager and Daphne Huang, VP of Finance. During our site visit, we saw the warehouse housing scrap copper deliveries, two smelters, including copper anode smelter, wire drawing facilities and the construction site of the two new smelters (Exhibit 1: Copper Anode Production; Exhibit 2: Drawing Facilities).

• New smelters construction on track: The Company has started the construction of two new smelters which are expected to be completed in 3Q11. Management believes that the two new smelters will be running at full capacity in 4Q11. In addition, it appears that the company is planning to build additional facilities on the 30 acres of recently purchased land adjacent to the company’s existing facilities in Danyang During the earnings call, management disclosed that the purchased land can house up to five more workshops containing 2 smelters each or a total of six workshops with 12 smelters, potentially adding up to 300,000 MT to the existing smelting capacity.
• We have also learned that the company is working on potentially diversifying into yet undisclosed new wire product. If the initial trials are successful, some of the workshops will be dedicated to the production of the new wire products.
  
  
  Notice Regarding Privacy and Confidentiality:
  
  This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.
  
  Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.
  
  Rodman & Renshaw, LLC may make a market in the securities being discussed.
  
  Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).
  
  Member FINRA.
  Member SIPC.
  
  

Earnings Review:

Liwa reported 2010 fourth quarter EPS of $0.45, slightly exceeding estimates. LIWA has a GPR of 4, meaning it is expected to grow EPS at least 20% to 30% over the next four quarters. If numbers are reliable, this stock is one of the best in the ChinaHybrid space. Controversy does exist regarding mismatching SAIC filings. However, the company has since provided filings that match. We do wish that LIWA would have provided EPS guidance. 2010 year end numbers have not been audited yet, which will now be done by Crowe. We will do some DD on this name. 2011 Implied EPS, based on company guidance, is a little shy of $1.80 estimate.

See outlook

See earnings review of all ChinaHybrids on our Blog.

Fourth Quarter 2010 Financial Highlights

• Sales increased 164% year-over-year to $135.5 million.
• Gross profit increased 90% year-over-year to $20.7 million.
• Net income increased to $9.9 million, or $0.33 per diluted share, compared with $4.2 million, or $0.18 per diluted share in the fourth quarter of 2009.
• Non-GAAP net income(1) was $13.4 million, a 73% increase over $7.7 million in the fourth quarter of 2009.(2)
• EBITDA increased 88% year-over-year to $18.8 million.(3)
• Strong balance sheet, with $90.6 million in cash and cash equivalents, or $3.02 per diluted share, as of December 31, 2010, compared with $34.6 million as of December 31, 2009.
• Cash flow from operations of $2.4 million, compared with cash used in operations of $627,000 in the fourth quarter of 2009.

GeoTeam® Note: Non-GAAP EPS was $0.45 vs. $0.32

Full-Year 2010 Financial Highlights

• Sales increased 129% to $370.5 million.
• Gross profit increased 71%, to $62.1 million, or 16.8% of sales, compared with $36.2 million, or 22.4% of sales in 2009.
• Net income improved 181% to $38.5 million, or $1.34 per diluted share, compared with net income of $13.7 million, or $0.72 per diluted share in 2009.
• Non-GAAP net income, increased 57%, to $40.1 million, compared with $25.6 million in 2009.(4)
• EBITDA increased 72% to $56.7 million, compared with $33.0 million in 2009.

GeoTeam® Note: Non-GAAP EPS was $1.39 vs. $1.34

"2010 was a record year for Lihua, which concluded with our first ever quarter of over $100 million in revenue. Our growth came from a number of factors, including strong demand in our end markets, our third quarter capacity expansion and the introduction of copper anode, which significantly broadened the addressable market for our products," said Jianhua Zhu, Chairman and Chief Executive Officer of Lihua.

Lihua is targeting 2011

• gross profit of $80.0 million to $82.0 million
• non-GAAP net income of $52.0 million to $54.0 million, (or $1.76 using current share count).

 representing year-over-year growth of 29-32% and 30-35%, respectively.

Rodman and Renshaw on LIWA                                                   2/23/2011

Solid FY10 Preliminary Results, Conservative Guidance.  

We are reiterating our Market Outperform rating and increasing our 4Q10 and FY10 top and bottom line estimates following a release of preliminary FY10 financial results that indicate higher than expected revenues, gross profit and earnings. At the same time, we are lowering our FY11 forecasts and price target to reflect a cautious FY11 management guidance. While we continue to observe strong demand for copper, copper wire and copper products, we are wary of the effect that tighter lending conditions may have on the end market demand in the coming quarters. That said, we do not rule out a guidance upside if the company receives a copper import license that will enable it to substantially reduce input costs. Overall, we continue to view LIWA valuation as attractive and encourage investors to take advantage of the favorable pricing to add shares or take new positions. 

Preliminary FY10 Results Significantly Exceed our Forecasts Revenues for the 4Q10 and FY10 are expected to come in at $135.4 million and $370.5 million, respectively, well ahead of our $106.8 million and $341.9 million estimates. 4Q10 and FY10 preannounced gross profit exceeded both our estimates of $17.5 million for 4Q10 and $58.9 million for FY10 and the company full year guidance of $57.0 - $60.0 million. The company reported FY10 non-GAAP net income (excluding non cash adjustments) of $40.0 million and GAAP net income of $40.6 million, pointing to a $0.6 million and $0.02 upside to our net income and fully diluted EPS estimates of $40.0 million and $1.39. 

Conservative FY11 Guidance We believe LIWA management is being conservative in its guidance for FY11, providing realistic and achievable forecasts. The company gross profit and non-GAAP net income guidance of $80.0 million to $82.0 million and $52.0 million to $54.0 million, respectively, come a touch below our previously issued forecasts of $83.3 million in gross profit and $56.8 million in GAAP net income (including the effect of stock-based compensation and other non-cash charges). Top and bottom line expansion will be primarily driven by the increase in LIWA’s refining capacity from the current 50,000 MT to 100,000 MT in the 2H11. 

Adjusting our Estimates, Lowering Price Target to $18 We are tweaking our FY11 estimates in line with the issued guidance. We are now forecasting $553.5 million in revenues, $80.7 million in gross profit and $53.1 million in net income, equivalent to fully diluted EPS of $1.77. Our current forecasts exclude the potential impact of copper scrap import license on the company’s gross profit as we believe it is premature to assume that the company will receive the license. We are maintaining our Market Outperform rating albeit with a lowered prices target of $18 based on the shares attaining a P/E multiple of 10x our FY11 fully diluted EPS estimate. 

Risks (1) Macroeconomic risks (2) Fluctuating copper prices (2) Availability of scrap copper (3) Intensifying competition (4) Delays in the construction of the second copper recycling facility.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Rodman and Renshaw on LIWA                    1/27/2011

LIWA: $15 Million Share Buyback Announced 

LIWA management and board of directors authorized a share repurchase program to buy back up to $15 million worth of its common shares over the course of the next 12 months. The repurchases will be subject to standard restrictions related to volume, price and timing and will be financed with available cash ($93 million as of the end of 3Q10) and operating cash flow. In our opinion, the announced share buyback illustrates management’s confidence in the growth prospects of the company as well as its strong commitment to shareholders. Assuming an average stock price of $10.50, we believe the company could retire up to 1.4 million shares within the next 12 months, potentially reducing the company's float by approximately 10.8% from 12.9 millions shares to 11.5 million shares.

Valuation 

Lihua is currently trading at 7.4x our FY10 fully diluted EPS estimate of $1.39 and 5.4x our FY11 fully diluted EPS estimate of $1.89. These multiples are well below the current FY10 and FY11 peer group averages of 19.1x and 13.8x for the US-listed wire and cable manufacturers. Given the company’s impressive earnings growth, healthy margins, substantial order indications and anticipated capacity expansion, we believe there is a significant upside potential for Lihua shares. We are reiterating our Market Outperform rating and a price target of $20 based on the shares attaining P/E multiples of 14.5x and 10.5x our FY10 and FY11 fully diluted EPS forecasts.

Risks 

(1) Macroeconomic risks (2) Fluctuating copper prices (2) Availability of scrap copper (3) Intensifying competition (4) Delays in the construction of the second copper recycling facility.

Notice Regarding Privacy and Confidentiality: 


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

DANYANG, China, Jan. 26, 2011 /PRNewswire/ -- Lihua International, Inc.  today announced that its Board of Directors has authorized the repurchase by the Company of up to $15 million of its common shares over the next 12 months.

"During 2010, we achieved our primary strategic and operational objectives of expanding capacity and growing our top and bottom-line results, and entered 2011 poised for continued strong growth as copper demand in China remains robust," said Jianhua Zhu, Chairman and CEO of Lihua. "With our new refined copper production facility scheduled to come on line in the second half of the year, we believe that our shares represent a compelling investment opportunity at current levels. It is unfortunate that there have been a number of false allegations regarding our company. We work extremely hard at Lihua and have a proven track record of growth, as well as sound business and financial reporting practices that are in compliance with U.S. SEC regulations as well as PRC tax regulations. We believe these attacks are an attempt to undermine the significance of our accomplishments for the benefit of a group of short sellers. We stand by the legitimacy and validity of our financial results and internal controls that are further overseen by a top-10 auditing firm.

"The approval of this share repurchase plan reflects the confidence of our Board of Directors and management team in our ability to continue carrying out our growth strategy and our strong commitment to enhancing shareholder value."

Rodman and Renshaw on LIWA                           1/24/2011

No Discrepancies Found Between SEC and SAIC Filings. 

Playing the Devil’s Advocate 

Following the publication of Seeking Alpha article on December 16, 2010 titled “Lihua Financial Reports Raise Questions”, we have conducted an investigation that included speaking with the Danyang State Administration for Industry and Commerce (SAIC) office and checking the company’s financials submitted to the Chinese authorities. Our checks revealed that the financials on file with the local SAIC agency are identical to the 2009 numbers posted on Lihua International’s official website for both subsidiaries - Lihua Electron and Lihua Copper. This, along with the reconciliation of SEC and SAIC numbers, posted on the same website, reaffirms our view that there are no inconsistencies between Lihua’s SEC and SAIC filings. We view the recent unwarranted pullback as a compelling buying opportunity ahead of the quarter and reiterate our Market Outperform rating and $20 price target.

Our Forecasts 

We expect 4Q10 and FY10 revenues of $106.8 million and $341.9, respectively. In 4Q10, the company will enjoy a full quarter of copper anode sales which we estimate will contribute $57.3 million towards 4Q10 sales based on expected volume of 7,600 MT. Our FY10 gross profit and net income forecasts of $58.9 million and $40.0 million or $1.39 per fully diluted share are at the higher end of the company’s guidance.

Valuation 

Lihua is currently trading at 7x our FY10 fully diluted EPS estimate of $1.39 and 5x our FY11 fully diluted EPS estimate of $1.89. These multiples are well below respective industry averages for US-listed wire and cable manufacturers. We are reiterating our Market Outperform rating and a price target of $20 based on the shares attaining P/E multiples of 14.5x and 10.5x our FY10 and FY11 fully diluted EPS forecasts.

Risks 

(1) Macroeconomic risks (2) Fluctuating copper prices (2) Availability of scrap copper (3) Intensifying competition (4) Delays in the construction of the second copper recycling facility.


Notice Regarding Privacy and Confidentiality: 


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

This is a reprint of Lihua International's 2010 Letter to Shareholders

December 22, 2010

Dear Fellow Shareholders:

The year 2010 was a period of tremendous accomplishment for Lihua - strategically, operationally and financially. We met or exceeded each of our growth objectives while positioning the company for ongoing success well into the future as the markets in which we operate continue to grow at an incredible pace.

As we approach the end of 2010, I wanted to take a moment to share with you this year’s most important milestones and what each of them means to our company.

• In April, we completed a successful secondary public offering, generating net proceeds of $32.5 million. At the end of the third quarter, we had cash and cash equivalents of $93 million including the proceeds of this transaction, with minimal debt. Our cash on hand is being used to support our growth and planned capacity expansion;
  
• In July, we launched production of refined copper products in our second smelter, doubling our annual refined copper production capacity to 50,000 metric tons;
  
• Concurrent with the launch of production at our second smelter, we introduced copper anode to our product line. Copper anode is considered a fundamental building block for most pure copper products, and this offering enables us to enter a wide range of new markets;
  
• In August, we shipped our first copper anode order through a supply contract with one of the world’s largest copper conglomerates. To date, 2011 copper anode supply contracts and volume demand indications already total 122,000 - 134,000 metric tons - well above our total estimated capacity for the full year;
  
• In November, we secured land use rights to approximately 30 acres adjacent to our existing refinery in Danyang, China, and broke ground on our second copper recycling facility. This facility will initially house two smelters, further doubling our annual refined copper production capacity to 100,000 tons.
  
• Our recent financial results reflect the strong demand for copper in China and the overall health of our business. For the first nine months of 2010, we generated revenue of $235 million, a year-over-year increase of 113%; we increased our gross profit by 63% year-over-year to $41.4 million; GAAP net income tripled year-over-year, reaching $28.6 million; non-GAAP net income increased 48% year-over-year to $26.5 million; and our adjusted EBITDA for the period increased 67% year-over-year to $37.9 million.
  
• In addition to our strong performance to date, our outlook calls for continued solid growth. In conjunction with our third quarter financial results, we increased our full-year gross profit guidance, raising our outlook to $57.0 million to $60.0 million, representing 57-66% year-over-year growth. We also reiterated our full-year outlook for non-GAAP net income, which calls for $38.1 million - $40.3 million, or 48-57% year-over-year growth.

The copper industry remains in a state of constrained capacity levels, with prices for raw copper near all-time highs. This is primarily driven by robust growth in copper consumption in China. This increasing copper consumption is attributable to a number of factors, including strong consumer demand for household appliances and electronics, growth in automotive sales, the government’s ongoing urbanization movement, and aggressive infrastructure build-out programs. We believe that this supply-demand imbalance creates an opportunity for high-quality refined copper products such as ours. Our business model and industry-leading products insulate us from fluctuations in copper pricing, while allowing us to capture the full benefit of the voracious demand for copper that currently exists in the Chinese market.

We are finishing the year well positioned for growth. During 2010, we expanded our customer base by approximately 15%, and will be closing the year with over 350 customers. In 2011, we will work aggressively to ramp up capacity to meet the needs of our large and growing customer base. We see great opportunity ahead of us for 2011 and look forward to an outstanding year.

On behalf of the entire Lihua family, thank you for sharing in our success to date and being a partner in our future.

Regards,

Jianhua Zhu
Chairman, CEO and Founder
Lihua International

Rodman & Redshaw on LIWA                                          12/14/2010

LIWA Reiterates FY10 Guidance

LIWA Reaffirms Guidance; Increases 4Q10 Copper Anode Sales Guidance Management reiterated its FY10 gross profit and non-GAAP net income guidance. FY11 gross profit and non-GAAP net income are expected to increase by between 57% and 66% YoY to $57.0 - $60.0 million and 48%-57% to $38.1 - $40.3 million, respectively. Company’s gross profit guidance includes the incremental benefit of precious metals content in copper anode. We remind that precious metals accounts for approximately 3% of the scrap metal content and can be extracted during the recycling process and re-sold directly offsetting the costs of scrap copper. In addition, LIWA has slightly increased previously issued guidance for 4Q10 copper anode sales from 7,000 MT to 7,634 MT. The company has to date shipped 11,000 MT of copper anode with the total shipments for the year expected to reach approximately 12,500 MT.

Demand Indications Exceed Current and Future Capacity 

The company continues to experience strong demand for its products driven by triple-digit year-over-year growth in the home appliance market and expanding components manufacturing output. Current copper anode supply contracts and volume demand indications total 122,000- 134,000 MT, including a 30,000 MT contract with one of China's leading metals conglomerates for FY11 delivery. While the demand for LIWA’s copper anode is strong, it will only translate into revenues if and when the company is able to increase its copper refining capacity from the current level of 50,000 MT annually.

Second Copper Recycling Facility Construction on Schedule 

LIWA has recently commenced the construction of the second copper recycling facility. The facility costing approximately $35-$40 million is expected to come online in the 2H11 bringing LIWA’s annual refined copper production capacity to 100,000 MT. We currently anticipate that the company will begin generating revenues from the second recycling facility in the 4Q11. As per company management, 75% of the total production capacity will be allocated to copper anode production.

Tweaking our Model 

We have slightly adjusted our 4Q10 estimates to reflect higher copper anode sales in the quarter. We now expect 4Q10 and FY10 revenues of $106.8 million and $341.9, respectively. Quarterly and annual gross profit is expected to come in at $17.5 million and $58.9 million, equivalent to 16.4% gross margin for 4Q10 and 17.2% gross margin for the FY10. Gross margins are likely to come down due to high copper prices and higher sales of lower margin copper anode. We are increasing our 4Q10 and FY10 fully diluted EPS estimates by a penny to $0.38 and $1.39, respectively. Our estimates are at the high end of the company’s guidance.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Third Quarter 2010 Financial Highlights

• Sales increased 135% year-over-year to $96.3 million.

• Gross profit increased 55% year-over-year to $15.1 million.

• Net income increased to $9.9 million, or $0.33 per diluted share, compared with a net loss of $(1.3) million, or $(0.08) per diluted share in the third quarter of 2009.

• Non-GAAP net income(1) was $10.0 million, a 49% increase, compared with $6.7 millionin the third quarter of 2009. Non-GAAP net income excludes charges related to the change in fair value of warrants of $0.1 million and $8.0 millionfor the third quarter of 2010 and 2009, respectively.

• Non-GAAP EPS was $0.33 vs $0.39 and analyst estmates of $0.31

"We remain on track to achieve significant full-year growth over 2009," said Mr. Zhu.  "In an effort to effectively address the needs of our customers, we are making great progress on the construction of our new plant which will contain two new smelters for scrap copper refinery, and double our refined copper production capacity to 100,000 tons. We recently secured the land use rights from the Chinese government and broke ground on the facility, which is scheduled to begin operation during the second half of 2011. Additionally, we are taking steps to ensure adequate supply of scrap copper and competitive raw materials pricing. To that end, we have a pending application with the Chinese government for an importers' license, which, once awarded, will enable Lihua to purchase scrap copper directly from overseas suppliers. With a strong cash position of $93 million, capacity expansion initiatives underway, raw material cost saving initiatives, and new, broad-reaching products beginning to ramp up, we believe that Lihua is well positioned to gain significant share in the large, growing and increasingly constrained copper market."

Outlook

As a result of the Company's strong growth outlook for the remainder of 2010, and considering the potential incremental benefit of precious metals content in copper anode to the Company's gross profit, the Company

• is raising its gross profit outlook for year 2010 to $57.0 million - $60.0 million.  

• expects 2010 non-GAAP net income of $38.1 million - $40.3 million, or 48-57% year-over-year growth.

The revised gross profit guidance reflects 57-66% year-over-year growth.  The Company's prior gross profit guidance was $52.9 million - $55.7 million, or 46-53% year-over-year growth.  The Company The Company expects that 2010 growth will be largely the result of continued strong demand in China for recycled copper and copper alternative products in the household appliance, consumer white goods, automobiles and infrastructure markets.

Global Hunter on Lihua Intl

Lihua International announced today that it has signed a copper anode volume supply contract for 30,000 tons in FY2011 with one of the world's leading copper and metal conglomerates. This is the same domestic customer that purchased 2,000 tons of copper anodes from LIWA in September of this year. In addition, the company has received 2011 demand indications for this product from three other customers totaling 80,000 tons, which is significantly above LIWA’s full year estimated refinery capacity. This demonstrates that demand for Lihua’s products remains very strong, as the commodity-like nature of its products allows the company to sell across a number of different industries, including infrastructure, auto, white goods, electronics, etc. It is our view that as long as the company is able to process scrap copper to purity levels of high enough quality to compete with pure copper products; they are unlikely to see a lag in demand as the value proposition remains intact. 

Capacity expansion plans on track. Lihua reiterated its plans to break ground on its second copper recycling facility in the near term. The new facility should be completed in 2H FY2011 and should double existing copper smelting capacity to 100,000 tons. The company plans to allocate all of the incremental 50,000 tons of smelting capacity to copper anode, tripling the existing anode capacity to 75,000 tons in order to meet the growing demand, with the remaining 25,000 tons allocated to copper rod, which the company plans to process further into copper wire. 

The company reaffirms its prior FY2010 guidance. LIWA continues to expect to generate $52.9MM-$55.7MM in gross profits in FY2010, approximately 50% Y/Y growth compared to FY2009, and $38.1MM-$40.3MM in non-GAAP net income, which corresponds to 48%-57% Y/Y growth. We expect the company to report $60.5MM in gross profits and $39.3MM in non-GAAP net income. Non-GAAP net income excludes non-cash gain/loss stemming from the fair value of the warrants adjustment. The company also expects to have a cash position of $75MM-$85MM by year-end 2011, following the build out of its new facility and equipment, which comes out to a net cash of ~$2.70 per share. Since launching a second smelter in September 2010, LIWA has already shipped over 4,000 tons of copper anodes and remains on track to meet its goal of shipping 8,000-10,000 tons of copper anodes by year end. 

We continue to view LIWA as one of the most attractively valued names in the US listed Chinese universe. The company currently trades at 5x FY2011 P/E and 2.5x FY2011 EV/EBITDA multiples, based on our FY2011 estimates, corresponding to 2008-2011 EPS PEG ratio of only 0.3. Lihua is poised to show 70% top line and 50% fully taxed bottom line growth in 2011 as a result of organic capacity expansion and has a trailing twelve months ROE and ROA of 25% and 20%, respectively. The company also currently has about $3.00 in net cash and $4.20 in net tangible asset value per share. In addition, LIWA is cash flow profitable, reporting positive free cash flow since 2006 and earning ~$17.5MM in free cash flow in the first six months of this year benefiting from its very low DSOs and inventory levels. 

Reiterating Buy rating and $17 price target. Our $17 price target is predicated on 8.3x FY2011 P/E and 5x EV/EBITDA multiples, in line with the other Chinese industrial companies. In our opinion a target price of $17 is easily justified by Lihua’s impressive margins and profitability, robust capital expenditure plans that are expected to double existing capacity by the end of 2011 and significant historical and forecasted demand for the company’s products.

Global Hunter Disclaimer

Rodman & Renshaw on Lihua:

Guidance: During the 2010 Rodman & Renshaw Global Investment Conference, LIWA management provided us and other investors with a business update and reiterated their financial guidance for FY10. Aided by investments in the new smelter, LIWA’s total production capacity is expected to reach 50,000 tons/year by FY10 and 100,000 tons/year by year end FY11. Management remains confident about delivering gross profit of ~$55.7 MM and Non-GAAP net income of $38.1 MM~$40.3 MM, with diluted EPS of $1.30~$1.40 for FY10. The company expects to maintain an ample cash balance of $75 MM~$85 MM by the year end. 

 Copper Price in Focus: We maintain that China’s appetite for copper and other industrial metals should be a key demand driver for the global metals market. There has been a recovery in global copper prices since early June this year. As of September 28, 2010, LME copper spot price closed at $7,947 per ton, yielding an YTD change of ~8.2%, while the December 2010 copper future contract traded on Shanghai Mercantile Exchange was closed at RMB 60,640 yuan per ton on September 29, 2010, representing an YTD change of ~1.0%. As copper price picks up, we expect to see continued growth in processed volume in LIWA’s copper products. 

 Key Takeaways: The recovery in copper prices indicates healthy demand in emerging markets like China and India for industrial metals. In our view, LIWA, with strong earnings/cash flow generation and clean balance sheet, is well positioned to benefit and gain share in China’s $30 BB copper and refined copper market. We believe the risk-reward profile in LIWA will further be supported by an improving macro picture in the copper market. 

 Valuation: LIWA is currently trading at 6.9x FY10 and 4.0x FY11 on a P/E basis, significantly below the peer group averages of 12x and 9x, respectively. On an EV/EBITDA bases, it is trading at 3.3x and 1.9x for FY10 and FY11 estimates, which also represents a significant discount to peer group multiples of 6.6x and 5.3x. Our peer group consists of profitable Chinese companies operating in the industrial sector, as well as US and international companies operating in copper smelting and wire businesses (excluding outliers from the peer group average calculation). Our $17 price target is predicated on 14x FY10 and 8.5x FY11 on a P/E basis and 8.8x FY10 and 5.3x FY11 on an EV/EBITDA basis, relatively in line with the other Chinese industrial companies. 

 Risks: a) Revenues derived from and emerging group of customers; b) Limited public operating history; c) Geopolitical risk of operating in China; d) Currency exchange risk. 

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Second Quarter 2010 Financial Results

• Sales for the second quarter of 2010 increased by 55% to $75.5 million, compared with sales of $48.8 million in the second quarter of 2009. The increase in sales was primarily driven by strong market demand for Lihua's copper rod and wire products from the Company's scrap copper refinery business as well as its CCA wire products.
  
• Net income for the second quarter of 2010 was $9.9 million, or $0.34 per share based on 29.3 million weighted average diluted shares outstanding. This compares with net income of $6.7 million, or $0.31 per share based on 21.8 million weighted average diluted shares outstanding during the same period in 2009.
  
• Non-GAAP net income for the second quarter of 2010 was $9.4 million, which excludes a $0.9 million benefit for the change in fair valuation of warrants and $0.3 million in one-time expenses associated with Lihua's follow-on public offering completed in April 2010. This compares with non-GAAP net income of $6.9 million for the second quarter of 2009, which excludes a $0.2 million expense for the change in fair valuation of warrants.
• Non-GAAP EPS was $0.32 vs. $0.32.

Lihua is raising 2010 gross profit and non-GAAP net income guidance. The Company now expects 2010 gross profit of $52.9 million to $55.7 million, or 46-53% year-over-year growth, and 2010 non-GAAP net income of $38.1 million to $40.3 million, or 48-57% year-over-year growth. The Company expects that 2010 growth will be largely the result of continued strong demand in China for recycled copper and copper alternative products in the household appliance, consumer white goods, automobiles and infrastructure markets.

Lihua previously expected 2010 gross profit of $48.9 million to $50.7 million and 2010 non-GAAP net income of $35.1 million to $36.3 million.

"We are operating near full capacity while trying to keep pace with demand and continuing to expand our business," said Mr. Zhu. "We remain on track to initiate construction on our planned new copper recycling facility in the fourth quarter of 2010, which we expect to come online in the second half of 2011. This new plant and additional smelting capacity will increase our annual refined copper output to 100,000 tons from our current capacity of 50,000 tons per annum. We also plan to expand our copper and CCA wire drawing capacity by the end of this year through the addition of new high-speed production lines. We believe these key initiatives will enable us to better address the growing customer demand for pure copper replacement products."

Lihua International, Inc. announced that it has begun production of refined copper products on its second smelter, located in the Company's existing copper recycling facility in Danyang, China. The launch of this new smelter, with annual production capacity of 25,000-tons, doubles Lihua's annual refined copper production capacity to 50,000 tons.

Sorce: PR Newswire

Lihua International recently announced that it will offer stock to raise funds for the construction of a new smelting facility.

Including an underwriter purchase option, LIWA will have a fully diluted share count of around 29.7 million.  Based on its 2010 net income guidance of $35.8 million, its implied EPS guidance drops to $1.20 from $1.41.  Before this event LIWA was on track to only achieve 2010 EPS growth of around 5.0%. We are thus removing LIWA from the GeoBargain on the Radar list.

The good news for long-term investors is that EPS estimates for 2011 of $1.87 may be conservative as funds from the offering are expected to accelerate its eventual growth track.

This situation should remind investors that when a company issues net income guidance without EPS guidance that dilution is a real risk, especially in the China Space.  We will revisit LIWA as the 2009 fourth quarter nears or if the company substantially exceeds/raises guidance.

Source: PR Newswire (April 8, 2010)