Global Hunter Reiterates Buy on Shengkai Innovations (VALV)

Global Hunter is out with its report today on Shengkai Innovations

, reiterating Buy. In a note to clients, Global Hunter writes, "Shengkai Innovations reported its F3Q last Friday. Both revenue and EPS beat our estimates, driven by strong growth across the board. Gross margin was in line but net margin exceeded our outlook thanks to improved expense control. Given a strong F3Q, management maintained FY11 revenue guidance but raised its adjusted net income guidance. While capacity utilization is currently running at full, the company expects additional equipment to arrive by June to bring an additional 28% capacity on line, which is on track with the previously announced plan. We are further encouraged by the company's execution and strong cash flow generation. Industrial peers are trading at mid- to high-teens levels while VALV shares are trading at 3.5x and 2.8x our FY11 and FY12 EPS estimates, respectively, which we believe is unwarranted. We reiterate our Buy rating and $13 price target, which is 14x our FY11 EPS and 11.5x our FY12 EPS." Shares of VALV closed Friday at $3.07, down 2.85% from Thursday's close.