Duoyuan Global Water (DGW) Beats, But Quarter Over Quarter Profit Flat

Duoyuan Global Water (DGW) reported results this morning that beat analyst estimates, but the EPS remains flat over the year ago quarter.  The company reported a Q2 EPS of $0.46, 10 cents better than the analyst estimate of $0.36 on revenue for the of $43.3 million, vs the estimate of $40.88 million.  The EPS number is a bit less than the year ago .47 number, but the revenue increased 38%.  So, while revenue growth remains robust, the company needs to do a better job of controlling costs.

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CEO Wenhua Guo commented:  “Our second quarter results demonstrate our sustained growth and presence in China’s water treatment industry as well as contributions from our new, higher margin product launches. We will continue to drive growth through new products developed through both our research and development efforts as well as partnership agreements and opportunities. Moving forward, we are confident in our ability to maintain our growth trajectory through our comprehensive and high quality product offerings, our low cost manufacturing base, our extensive distribution network and our focus on continually developing new products.”

Here’s the breakdown of revenue growth for each segment:

Water reuse equipment up 45% to $18.7 million.
Water conservation equipment up 28.4% to $15 million
Water purification equipment up 36% to $8.7 million.
Spare parts increased 48% to 900K

Looking ahead, the company expects revenue of $48.5 million this quarter which is slightly ahead of the analyst estimate of $48 million.

Shares of DGW have looked increasing bullish in recent weeks, but are up 50% in just the past six weeks.  I’m not sure this report was strong enough to sustain the move in the short term and the stock may need to digest gains a bit.  There is new support around the $20 level and resistance around $27.  A pull back to support around $20 would offer a very compelling entry point.

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