Zacks_Analysts' Blog : Cogo Group Matches Estimates - Analyst Blog

COGO Group Inc (COGO) reported second quarter of 2010 earnings per share from continuing operations of 12 cents, matching the Zacks Consensus Estimate. Cogo posted revenues of $91 million, up 23.6% year-over-year.

In the second quarter, its industrial business represented nearly 17.4% of total business. Industrial Applications Business grew roughly 83.7% year-over-year. The company is taking part in opportunities in the smart grid, smart meter, automotive and high-speed railway end-markets in China. 



Digital media made up about 57.4% of total revenue. Its sales increased 15.1% year-over-year and included the mobile handsets business.



Telecom represented 23.9% of total revenue, showing a sales increase of 16.9% year-over-year. Service business represented about 1.3% of total revenue.

Gross profit for the quarter was $12.9 million, up 22.7% from $10.5 million in the corresponding quarter of last year. Gross margin for second quarter was 14.1%, compared to 14.3% reported for the year-ago quarter.

In the second quarter, Cogo’s blue-chip customer base grew from 80 to 84 sequentially and was up 13.5% on a year-on-year basis. The total number of SME customers increased by 36 sequentially to a total of 1,386, a year-on-year increase of 14.6%. Many new SME customers were acquired in the digital media and Industrial segments. More than 90% are repeat customers. Total revenue is split about 68% and 32% between blue chip and SME respectively, and the company expects that this will move gradually to a 50/50 ratio over the next few years.

Average Revenue per Customer (ARPU) from Blue-chip customers in the second quarter was $736000, up 7% sequentially and up 4% from the prior year period. ARPU from SME customers in the second quarter was $21000, up 10% sequentially and up 21% year-over-year. SME ARPU went up 37% in the last six quarters.

The company exited the quarter with cash of $129.4 million, up $31.6 million on the $97.8 million reported at the end of 2009. Total bank borrowings at the end of the quarter were $69.9 million compared with $17.5 million as of Dec 31, 2009. Shareholders’ equity was $233.8 million as of Jun 30, 2010, which increased from $226.1 million as of Dec 31, 2009.

For the third quarter of 2010, the company expects revenue in the range of $94 to $96 million and pro-forma diluted EPS at 19 to 20 cents. Gross margin is expected to remain roughly stable in the third quarter versus the second quarter and operating margin is expected to improve sequentially. The company, however, did not provide full year revenue guidance.

Cogo Group, Inc., through its subsidiaries, provides customized module design solutions, focusing on the digital media, telecommunications equipment, and industrial business end-markets in China.