Cogo Wins Wind Turbine Contract

Cogo Group Inc. (NASDAQ:COGO) announced a wind turbine contract win following the acquisition of MDC Tech in late Jan 2011. The contract was signed with DongFang Turbine Co., Inc., and is valued at approximately $1.5 million.

Cogo will provide design, engineering and logistical services over the life of the contract. The company expects that shipments will commence and revenue will be recorded in the third quarter of 2011.

Cogo is in a position to benefit from the explosive growth in China, as the company’s design solutions that are used in three major growth areas, telecom, mobile handsets, and digital media. Cogo’s strength lies in 1,000 customers who represent virtually all Tier-1, Tier-2 and Tier-3 players in the markets.

We are encouraged by the Chinese government monitoring and its physical policy to stimulate its demand. We continue to believe that the Chinese economy growth will exceed that of most of other markets.

Additionally, it is benefiting from a number of the tailwinds that we believe put COGO in unique position to grow revenues in 2009. This includes China 3G, the growth of its export business and other opportunities in our industrial segments.

While business is improving from a weak November, we believe that going into Chinese New Year the handset inventories appear fairly normal and it continues to benefit from exports as well as domestic handset vendors including ZTE.

While the company is riding the heels of the strong growth in China, we remain concerned about a few issues that the company faces. First, the Chinese market has been growing at over 10% annual GDP growth for the past several years, and we are concerned that the economy may face a slowdown in the near term.

Cogo Group, Inc. and its subsidiaries provide customized module design solutions for a diverse set of applications and end markets, serving as a gateway for technology component suppliers to access leading electronics manufacturers in China.

The company’s customized module design solutions allow customers to take advantage of technology components from reputable suppliers in an efficient and cost-effective manner, thus reducing their time-to-market and lowering their overall costs. Arrow Elecrtonics Inc (NYSE:ARW) is a direct competitor.

We currently maintain Zacks #3 Rank which signifies Hold recommendation for one to three month period.

 
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