Oppenheimer Initiates China Automotive Systems (CAAS) Coverage

Oppenheimer & Co. analyst Andy Yeung initiated coverage of China Automotive Systems, Inc.

with an Outperform rating and a $25 per share price target. Yeung said that as a key supplier to Chinese auto manufacturers, China Automotive Systems is benefiting from the growth in domestic auto brand sales. The analyst went on to say that because China Automotive Systems has a strong balance sheet and free cash flow, it is well-positioned to continue its organic growth strategy and be able to take advantage of potential strategic investment opportunities. The Oppenheimer & Co. analyst wrote, "we are initiating coverage on China Automotive Systems (

), a leading supplier of power steering systems and components for commercial vehicles and passenger cars in China, with an Outperform rating and $25 price target (based on 19x our 2011 EPS estimate). CAAS should benefit from continuing favorable government policies and rising car ownership in China, and gain market share from strong sales of domestic-brand vehicles. Long term, CAAS should benefit from export opportunities and growth in China's auto aftermarket. The shares currently trade at ~15x our 2011E EPS, a premium to its peers that is well deserved, in our view, given the company's growth prospects and consistent execution."