FUQI: Following Roth's Footsteps

Roth Capital just initiated a ‘Buy’ on this Chinese company FUQI International Inc., (NASDAQ:FUQI) and I thought I’d take a look..

FUQI International Inc., (NASDAQ:FUQI) trading in the $7.50 range and in the 140,000+ daily volume range had a great month in September. Based in ShenZhen, China FUQI manufactures and sells fine jewelry in China. FUQI has 540 full time employees, was founded in 2001 and is part of the Consumer Goods Sector.

The good news in September for FUQI was an expansion of its retail presence. The Company has become very adept over the years at opening jewelry counters within existing merchants. 

At its counters a shopper will find: basic gold jewelry, rings, bracelets, necklaces, earrings, and pendants made from precious metals, such as platinum, gold, palladium, and karat gold. FUQI also manufactures jewelry with diamond and other precious stone inlays, as well as gold coins and gold bars.

Two FUQI-branded jewelry counters have opened in two department stores in September, one at the 'Xidan Shopping Mall', the other at the 'Chengxiang Huamao Department Store', which are located among the biggest business and tourist districts in Beijing.

The average size of each store counter ranges from 330-550 square feet. Approximately 2,000-2,500 SKU's will be available for sale at each counter on a monthly basis. Another two FUQI-branded jewelry counters are expected to open in Beijing shortly.

FUQI has also opened one Temix jewelry counter at a 'Department Store of Articles for Women', a wholly-owned subsidiary of Shanghai Hualian Supermarket Corporation, located at the Huaihai Zhong Road in Shanghai which is a central shopping destination.

Three additional Temix jewelry counters are expected to open- the first at the 'City Center Shopping Mall' in the Changning District, Shanghai; the second at the 'Blue Island Mansion Shopping Arcade', Chaoyang District, Beijing; and the third at the 'Chengxiang Trading Center', Haidian District, Beijing in November 2008. The average size of each store counter will be approximately 440-770 square feet with approximately 1,500-2,000 SKU's available for sale at each counter on a monthly basis.

Here are some numbers... for the third quarter, the Company anticipates total wholesale revenue of approximately $75 - $77 million, which would represent a year-over-year increase of approximately 108% - 114%, respectively. FUQI expects retail revenue in the third quarter of approximately $3.8 - $4 million and net income in the third quarter is expected by management to be in the range of $5.8 - $5.9 million, or $0.26 - $0.27 per diluted share, based on a weighted average share count of 22.1 million shares.

For the full year 2008, FUQI expects total revenue of approximately $325 - $333 million. This forecast is comprised of $315.5 - $323 million in expected wholesale revenue and $9.5 - $10 million in expected revenue from retail. FUQI also anticipates consolidated net income of $23.7 - $24.3 million, and diluted EPS of $1.07 - $1.09, based on a weighted average share count of 22.2 million shares.

Okay. With China’s GDP growing at 10% a year, hard working people begin to reward themselves with a little luxury when the good times are rolling. This, the estimated year-over-year increase in revenues of approximately 108% on the low side) and their growing retail presence step by step earned them the ‘Buy’ rating.