CHINA VALVES TECH (OTC:CVVT)

ITEM 4.01 Changes in Registrant’s Certifying Accounts.

On Aug 27, 2014, China Valves Technology, Inc. (the “Company”) engaged Wei,Wei & Co., LLP (“Wei”) as the Company’s independent registered public accounting firm. Neither the Company, nor anyone on its behalf, consulted Wei during the Company’s two most recent fiscal years and any subsequent interim period prior to the Company’s engagement of Wei regarding any of the matters set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

ITEM 4.01  Changes in Registrant’s Certifying Accounts. 

On May 23, 2014, Friedman informed the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company of its decision to resign as the Company's independent registered public accounting firm after substantial deliberation, effective immediately. During the Engagement Period, Friedman did not issue any reports on the Company’s financial statements.

We furnished Friedman with a copy of this disclosure on May 29, 2014, providing Friedman with the opportunity to furnish us with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statement made by us herein in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A letter from Friedman, dated June 3, 2014 is filed as Exhibit 16 to this report.

ITEM 7.01. REGULATION FD DISCLOSURE.

On August 16, 2013, China Valves Technology, Inc. (the “Company”) received a subpoena from the Securities and Exchange Commission (“SEC”). In a letter accompanying the subpoena, the SEC stated that it is conducting a confidential formal investigation of the Company. The SEC’s subpoena requests the production of documents and communications that, among other things, relate to the purchase of China Valves (Changsha) Co., Ltd., the under-accrual of value added tax for Shanghai Hanwei Valves Co., Ltd., transactions by Rodman & Renshaw in the shares of the Company, and other corporate, operational, financial and accounting matters. The Company intends to cooperate with the SEC in its investigation.

Item 4.02 Non-Reliance on Previously Issued Financial Statements or Related Audit Report or Completed Interim Review.

During the interim review of the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended December 31, 2011, the Company’s top management discovered that the Value Added Tax (“VAT”) return of the Company’s subsidiary, Shanghai Hanwei Valves Co. Ltd. (“Hanwei”), could not be reconciled to the Company’s financial statements for the fiscal year ended September 30, 2011. After internal auditing and investigation, management found that Hanwei purchased certain equipment from a third party to perform reverse engineering and improve its products. Since the third party did not provide Hanwei with an invoice or any other written record of the sale and, because Hanwei was concerned that its purchase of the equipment might cause it to become the subject of a challenge with respect to intellectual property rights associated with the equipment, Hanwei’s management made the determination to account for this purchase transaction as VAT and supplementary tax payments against the VAT payable and paid the third party as such.

The Company then retained Shanghai Minxin Accounting Firm (“Minxin”) to do an independent auditing of Hanwei for its 2010, 2011 and 2012 VAT. Minxin did not find any problem with Hanwei’s 2010 VAT and supplementary tax payments. However, Minxin found that for the period between January to September 2011, Hanwei underpaid approximately RMB 11.0 million (approximately $1.7 million) for VAT and supplementary tax. Minxin also found that for the period between October 2011 to September 2012, Hanwei underpaid approximately RMB 1.2 million (approximately $0.2 million) for VAT and supplementary tax. Until the end of September 2012, Hanwei underpaid a total of approximately RMB 12.2 million (approximately $1.9 million) for VAT and supplementary tax.

On June 27, 2013, the Board of Directors (the “Board”) of China Valves Technology, Inc. (the “Company”) accepted Mr. Gang Wei’s resignation as the Company’s Chief Financial Officer. Mr. Wei’s resignation is not in connection with any known disagreement with the Company on any matter. In connection with the resignation of Mr. Wei, the Board appointed Mr. Renrui Tang as the Chief Financial Officer.

Since December 2010, Mr. Renrui Tang worked as the Company’s Financial Controller. Between February 2009 and July 2009 and between May 2010 and December 2010, he also served as the Company’s interim Chief Financial Officer. From December 2007 to March 2008, Mr. Tang was the Company’s Chief Financial Officer. From 2004 to March 2008, Mr. Tang was the financial director of the Company’s subsidiary Kaifeng High Pressure Valve Co. Ltd. His major duties included managing accounting and financing activities, supervising financial analysis, capital allocation, internal control and auditing. Between 1994 and 2004, Mr. Tang worked for the Company’s subsidiary Zhengzhou Zhengdie Valve Co. Ltd. as the manger for financial department. He had been in charge of the firm’s financing activities and various issues in accounting fields. Mr. Tang is an International Certified Public Accountant.

ITEM 4.01 Changes in Registrant’s Certifying Accounts.

On May 30, 2013, the Audit Committee of China Valves Technology, Inc. (the “Company”) engaged Friedman LLP (“Friedman”) as the Company’s independent registered public accounting firm. Neither the Company, nor anyone on its behalf, consulted Friedman during the Company’s two most recent fiscal years and any subsequent interim period prior to the Company’s engagement of Friedman regarding any of the matters set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K. The Company previously filed a Current Report on Form 8-K dated July 23, 2012 announcing the resignation of BDO China Shu Lun Pan CPAS LLP as the Company's independent registered public accounting firm.

ZHENGZHOU, China, Aug. 20, 2012 (GLOBE NEWSWIRE) -- China Valves Technology, Inc. (Nasdaq:CVVT) ("China Valves" or the "Company"), a leading Chinese metal valve manufacturer, today announced that the Company received a letter from The Nasdaq Stock Market ("NASDAQ") notifying the Company of its failure to file the quarterly report on Form 10-Q for the period ended June 30, 2012 (the "Filing") as required by NASDAQ Listing Rule 5250(c)(1) for continued listing. The letter was issued in accordance with NASDAQ Listing Rule 5815(a). The letter stated that the Company has until September 13, 2012 to provide NASDAQ with a plan to regain compliance with NASDAQ's filing requirements. Based on the plan, NASDAQ can grant an extension of up to 180 calendar days from the due date of the Filing to regain compliance. If NASDAQ does not accept the Company's plan, the Company will have the opportunity to appeal the decision to a NASDAQ Hearings Panel.

On July 9, 2012, BDO China Shu Lun Pan CPAS LLP (“BDO China”) informed the Audit Committee of the Board of Directors (the “Audit Committee”) of China Valves Technology, Inc. (the "Company") of its decision to resign as the Company's independent registered public accounting firm due to management’s request to substantially lower BDO China’s professional service fees, effective immediately.

The Audit Committee did not recommend or approve the decision to change auditors. In addition, the Audit Committee did not approve the fee reduction requested by management and did not authorize management to communicate with BDO China regarding the fee reduction. Accordingly, the Audit Committee and the Board adopted resolutions to confirm the engagement letter with BDO China and authorized and directed management to retract its fee reduction proposal. Thereafter, management formally notified BDO China in writing of the retraction of management’s fee reduction proposal. The Audit Committee has contacted BDO China in order to discuss the withdrawal by BDO China of its resignation.

Second Quarter 2012 Results

• Total revenue was $38.4 million, down 8.4% from $42.0 million in the same quarter last year.
• Net income for the three months ended March 31, 2012 was $1.8 million, compared to $7.6 million for the same quarter in 2011. Diluted earnings per share were $0.05, compared to diluted earnings per share of $0.21 for the same period in 2011.

Mr. Jianbao Wang, Chief Executive Officer of China Valves, commented, "We experienced a weak quarter due to unfavorable economic conditions and tight liquidity conditions that inhibited capital projects. Despite these challenges, we remain confident in our ability to achieve our guidance for fiscal year 2012."

Business Outlook

China Valves reiterates its guidance for fiscal year of 2012, expecting to achieve top-line growth in the low teens and expecting gross margins to fluctuate in the range of 35% to 37% depending on shifts in product mix. It should be noted that these estimates are based on current conditions and are subject to revision based on the uncertainty in the global economy and range of potential policy responses and monetary actions by China's central government.

"In the second half of fiscal 2012, we will continue to focus on generating more sales and collecting account receivable. We expect to achieve significant revenue growth in the second half of fiscal 2012 compared to the first half. We are in negotiations to secure a longer term credit facility which would also help us with fluctuations in the payment cycle of our larger, state-owned enterprise customers. We continue to work towards building a dominant position in China's highly fragmented industrial valve industry and create sustainable value for our shareholders," said Mr. Wang.

Item 4.02   Non-Reliance on Previously Issued Financial Statements or Related Audit Report or Completed Interim Review.

Information responsive to Item 4.02(a):

During the interim review of the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended December 31, 2011, the Company’s current independent auditors BDO found that the Value Added Tax (“VAT”) return of the Company’s subsidiary, Shanghai Hanwei Valves Co. Ltd., could not be reconciled to the Company’s financial statements for the fiscal year ended September 30, 2011. BDO brought this matter to the attention of the Company’s management on February 8, 2012. Management and BDO performed an initial investigation and review of the matter, and also discussed the matter with the Company’s former auditors, Frazer Frost LLP (“Frazer”). As a result of this review, management determined that a restatement of certain line items presented in the consolidated financial statements and the relevant notes for the quarters ended March 31, 2011 and June 30, 2011, and the year ended September 30, 2011, would be necessary in order to correct the under accrued VAT for the year ended September 30, 2011. The restatement resulted in an increase of approximately $2.67 million in the Company’s previously reported cost of sales in the consolidated statements of income for the year ended September 30, 2011, and a corresponding increase of approximately $2.67 million in the income and other tax payables in the consolidated balance sheet as of September 30, 2011. The retained earnings in the consolidated balance sheet and consolidated statements of stockholders’ equity as of September 30, 2011 were decreased by approximately $2.67 million. The adjustment has no effect on cash flow for the year ended September 30, 2011, and was a best estimate as of February 9, 2012. The Company, BDO and Frazer will continue to review this issue and follow necessary processes. This adjustment was reflected in the audited September 30, 2011 numbers set forth in the financial statements included in the Form 10-Q for the quarter ended December 31, 2011, which was filed on February 9, 2012, but will be finally determined and disclosed upon the conclusion of the aforementioned review of this issue with the BDO and Frazer.

In connection with the restatements, management reevaluated the effectiveness of the Company’s internal control over financial reporting. The Company had previously disclosed the existence of ineffective disclosure controls and procedures and internal controls in its annual report on Form 10-K for the period ended September 30, 2011 and continued to report the existence of ineffective disclosure controls and internal controls in its quarterly report on Form 10-Q for the period ended December 31, 2011. Management believes that the error that resulted in the aforementioned restatement is an indication of an additional deficiency that rises to the level of a material weakness for year ended September 30, 2011. The Company will report this material weakness in the Form 10-K/A filing that the Company plans to make as soon as practicable. No other additional material weaknesses were identified.

First Quarter 2012 Results

Language in CVVT December 2012 quarter did not emphasize a need to raise money from the capital markets...

We believe that our current available working capital and bank loans should be adequate to sustain our operations at our current levels through at least the next twelve months.

...as it did in its September 2011 filing 

We believe that we maintain good relationships with the banks we deal with and our current available working capital, after receiving the aggregate proceeds of the capital raising activities and bank loans, should be adequate to sustain our operations at our current levels through at least the next twelve months.

Third Quarter 2011 Results

ZHENGZHOU, China, June 20, 2011 /PRNewswire-Asia-FirstCall/ -- China Valves Technology, Inc. (NASDAQ: CVVT) ("China Valves" or the "Company"), a leading Chinese metal valve manufacturer, today announced that one of the Company's subsidiaries, Henan Kaifeng High Pressure Valve Co., Ltd. ("Kaifeng Valve"), received two purchase orders from China Guangdong Nuclear Power Group ("CGNPG") for gate valves, check valves and globe valves worth $2.0 million in total.

State-owned CGNPG is one of China's two leading companies engaged in nuclear power development and operations. The nuclear forged steel valves covered by the first purchase order will be used for CGNPG's projects at the Hongyanhe nuclear power station in Liaoning province and Ningde nuclear power station in Fujian province. Kaifeng Valve expects to deliver the products for the first purchase order in batches until 2012.

China Valves signed the contract for the second purchase order with its partner Shanghai Electric, the contractor of CGNPG. The valves under this contract are intended for CGNPG's Yangjiang nuclear power station in Guangdong province'. Kaifeng Valve expects to deliver these products in August 2011.

"These two orders reflect our strong strategic partnership with CGNPG and Shanghai Electric," said Jianbao Wang, Chief Executive Officer of China Valves. "While China is still in the process of testing its nuclear plants under construction and emphasizing heightened safety requirements following the nuclear disaster in Japan earlier this year, China's voracious appetite for energy indicates that nuclear power is still likely to be an important part of China's energy solution in the future."

ZHENGZHOU, China, June 14, 2011 /PRNewswire-Asia/ -- China Valves Technology, Inc. (NASDAQ: CVVT) ("China Valves" or the "Company"), a leading Chinese metal valve manufacturer, today announced that one of the Company's subsidiaries, China Valve Technology (Changsha) Valve Co., Ltd. ("Changsha Valve"), received purchase orders for the Tibet Pangduo Hydro Project (the "Pangduo Project") and South-to-North Water Diversion Project worth several million USD in total. The Company expects to deliver these orders in July 2012 and October 2011, respectively.　

The Pangduo Project is the largest water control project under construction in the Tibet Autonomous Region, focusing mainly on irrigation and hydropower generation and costing an estimated RMB 4.69 billion. The construction of the Pangduo Project was launched on July 15, 2009, and is expected to be completed in 2016.

For the South-to-North Water Diversion Project, Changsha Valve expects to provide electronic or manual butterfly valves. The purpose of the South-to-North Water Diversion Project is to improve utilization of water resources in China.

"The Pangduo Project is our first move into the Tibetan market, which is a region with rich water resources, and we expect to continue exploring this large and developing market," said Jianbao Wang, Chief Executive Officer of China Valves. "In addition, the purchase order for the South-to-North Water Diversion Project represented our leading market position in China's hydro market."

Rodman and Renshaw on CVVT                                5/11/2011

1Q11 Results Below Expectations; Lowering Price Target to $13

1Q11 Results Missed Expectations

China Valves Technologies (“China Valves”, Ticker: CVVT, Market Outperform) reported its 1Q11 financial results that missed our expectations. Revenue in the quarter came in at $42.0 million, up 56.6% YoY, but a touch shy of our estimate of $42.6 million. Gross profit reached $17.5 million, up 26.3% YoY, but also a bit light compared to our expectation of $17.7 million. Non-GAAP net income came in at $6.7 million, or $0.19 per diluted share, clearly missing our respective estimates of $8.0 million and $0.23.

At the end of the quarter, China Valves had $24.2 million in cash and cash equivalents, $105.3 million in working capital, and a current ratio of 3.4. Q1 accounts receivable were $96.0 million and DSO were 193. The company had no long-term debt and its shareholders’ equity stood at $206.1 million.

The company reiterated its previous financial guidance for 2011, in which it expected to achieve 25%-28% of YoY sales growth and gross margin of 41%-42% “for the next few quarters.”

Our Take on the Quarter

In our opinion, after several quarters of outstanding growth, much of it coming from acquisitions, the company has entered into a period of digestion and consolidation, during which period macro influence will become more pronounced, management execution will take on greater significance, and blockbuster financial performance will be harder to come by. This is further compounded by difficulties in the U.S. capital market with shareholder lawsuits and pressure to improve both corporate governance and accounting standard further distracting and burdening the management. Thus we are now adopting a somewhat more conservative view on the company’s near to medium term financial performance. In this regard, we do not consider the company’s Q1 performance as a major disappointment. Revenue was quite close to our estimate, and gross margin of 41.7% represented a nice bounce back from a dismal 35.3% in 4Q10. The high accounts receivable and DSO are a major concern, however. Management cited Chinese government’s tightening credit policy and a high number of large state-owned enterprise clients who are accustomed to delaying payments as major reasons for this problem. While we can accept this explanation, we certainly want to see reductions in these numbers, particularly in the current market environment, in which high accounts receivable numbers are often viewed with suspicion. We believe the ability of the management to achieve its stated goal of limiting DSO to 140-145 will be a major testament to China Valves management’s competency.


Notice Regarding Privacy and Confidentiality:


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

First Quarter 2011 Highlights

• First quarter net revenue reached $42.0 million, up 56.6% from $26.8 million for the same period last year
• Sales from organic growth was 42.1% of total sales growth
• Gross profit increased to $17.5 million, up 26.3% from $13.9 million from the same period last year
• Net income reached $7.6 million, or $0.21 per fully diluted share, compared with $6.6 million, or $0.19 per fully diluted share, for the first quarter of 2010
• Adjusting for non-cash items related to the change in fair value of warrant liabilities, non-cash compensation expense and gain from acquisitions, adjusted net income was $6.7 million, or $0.19 per diluted share, compared with adjusted net income of $7.0 million, or $0.20 per diluted share, for the first quarter of 2010

"Although seasonally slow, the first quarter of 2011 demonstrated robust revenues growth reflecting strong market demand and the contribution of our subsidiary Hanwei Valve, which we acquired in April of last year. Leveraging Hanwei Valve we were able to expand sales to the petrochemical and oil sectors, further shifting our sales mix to ball valves and gate valves particularly for oil and gas pipelines and petrochemical plants. Organic growth was a solid 23.8% as we continued to expand sales to the power generation market through sales of large diameter high pressure valves and other valves," said Mr. Jianbao Wang, CEO of China Valves. "Our gross margins, while at level with last quarter after excluding any non-cash charges, remained lower than the year ago period mainly due to the changes in our sales mix for the quarter. Our main priority for 2011 is to increase integration of procurement and sales across our different subsidiaries. As we proceed with the restructuring of our production processes, we expect some improvement in our margin profile over time."

Business Outlook

The Company's current priority is improving the efficiency of internal operations through streamlining of manufacturing practices and consolidating sales and procurement efforts of its different subsidiaries. The Company expects the petrochemical, oil and gas industry to drive sales in 2011, in addition to demand from domestic thermal power and water supply markets. While China's nuclear valve market faces heightened safety standards following the nuclear disaster in Japan in March, the Company expects nuclear power to remain a long-term growth driver.

The Company is currently focused on bidding for larger projects, which it expects will improve profitability going forward. As of March 31, 2011, backlog of firm orders was $100 million.

"We are pleased with a strong start to the year and remain comfortable with our target revenue growth rate of 25%-28% for 2011. We expect to maintain our position as an industry leader in a number of our end-user markets through our focus on innovation, new product introductions and technical excellence. We maintain our target revenue growth rate of 25%-28% for 2011. Due to inflationary pressures, we maintain our gross margin expectation of around 41%-42% for the next few quarters. As we complete the integration efforts of our subsidiaries and recognize manufacturing and sourcing efficiencies, we would expect to see this result in improved margin performance," said Mr. Wang. "Account receivables remain a challenge, as we are adjusting to the customer bases of our newest subsidiaries. In order to improve cash flow, we are gradually introducing more centralized payment terms and collection procedures and expect to update our investors as we make progress on this important issue. We believe that our cash position and available debt facilities provide us with sufficient resources to execute our growth strategy."

Fourth Quarter Highlights:

• Fourth quarter net revenue reached $52.3 million, up 106.3% from $25.4 million for the same period last year
• Organic growth was 31.6% of total sales growth
• Gross profit increased to $18.4 million, up 48.8% from $12.4 million from the same period last year
• Net income reached $6.4 million, or $0.18 per fully diluted share, compared with $16.4 million, or $0.52 per fully diluted share, for the fourth quarter of 2009
• Adjusting for non-cash items related to the change in fair value of warrant liabilities and non-cash compensation expense, adjusted net income was $4.3 million, or $0.12 per diluted share, compared with adjusted net income of $6.4 million, or $0.20 per diluted share, for the fourth quarter of 2009

Full Year 2010 Highlights

• Net revenue reached $183.7 million, up 92.6% from $95.4 million last year
• Organic growth was 22.6% of total sales growth
• Gross profit increased to $80.4 million, up 71.7% from $46.8 million from last year
• Net income reached $43.2 million, or $1.25 per fully diluted share, compared with $23.4 million, or $0.75 per fully diluted share, for 2009
• Adjusting for non-cash items related to the change in fair value of warrant liabilities, gain from acquisition and non-cash compensation expense, adjusted net income was $40.3 million, or $1.16 per diluted share, compared with adjusted net income of $24.9 million, or $0.80 per diluted share, for 2009

"We continued our solid sales growth in the fourth quarter of 2010 supported by our acquisitions earlier in the year. Ball valves contributed by our subsidiary Hanwei Valve boosted sales to the petrochemical, oil and gas industry, to which sales increased more than 300% year over year in the quarter. This represents an ongoing shift in our product portfolio and increased diversification of revenue among several significant growth industries in China. During the quarter, we also maintained our strongholds in the thermal power generation and water supply sectors while expanding sales to the nuclear power industry through the contribution of new products, such as large diameter high pressure valves used in power stations, large diameter valves for water-pipe projects and gate valves for nuclear power plants," said Mr. Jianbao Wang, CEO of China Valves.

"Looking forward, we remain confident in the growth opportunities with our end-user markets and in our position as an industry leader. The localization trend in the thermal power industry is an encouraging sign of a shift towards domestic valves in increasingly demanding applications and one we hope will transfer to other key applications as well. Consequently, we target 25%-28% revenue growth for 2011 excluding any additional acquisitions," said Mr. Wang

Rodman and Renshaw on CVVT                                              3/16/2011

4Q10 Earnings Results: Here Comes Margin Pressure

4Q10 Results

After four consecutive above-expectation quarters, China Valves Technologies (“China Valves”, Ticker: CVVT, Market Outperform) reported 4Q10 financial results that clearly missed market’s bottom-line expectation despite a strong sales performance. Revenue for the quarter reached $52.3 million, up 106.3% YoY and easily beating Street consensus of $44.0 million and our Street-high estimate of $44.4 million. Gross profit, however, actually came in below expectations. At $18.4 million, it missed our estimate of $20.6 million. Non-GAAP net income came in at $4.3 million, easily missing both the company’s own guidance of $11 million and our estimate of $11.7 million. Actual diluted EPS was $0.12, falling significantly short of our $0.33 expectation and $0.31 Street consensus. For full year 2010, the company realized $40.3 million of non-GAAP net income and $1.16 non-GAAP diluted EPS, satisfying its existing make good provision of $34 million after tax net income and $1.082 non-GAAP EPS.

As of December 31, 2010, China Valves had $25.8 million of cash and cash equivalents, $86.2 million of working capital, and a current ratio of 2.7. The company had no long-term debt and its shareholders’ equity was $188.6 million.

Updated 2011 Guidance

China Valves provided an updated financial outlook for 2011. The company now expects to achieve 25%-28% of YoY sales growth in 2011 (excluding any potential acquisitions) and gross margin of 41%-42% “for the next few quarters.” Management also indicated during the earnings conference call that it anticipated a full year 2011 net margin between 18% and 21%. The new guidance was by and large less optimistic compared to the company’s previous stance.

Discussions

Greater margin pressure The main culprits of the much weaker-than-expected bottom-line performance were write-downs, escalating operating expenses, and rising costs. Gross margin was hit hard by $0.7 million of inventory allowance, $1.9 million of price adjustment loss, and $1.3 million of impairment loss. Actual G&A and selling expenses during the quarter were $ 6.5 million and $3.8 million, much higher than our respective estimates of $2.7 million and $2.2 million as well as the company’s historical norms. While we are cognizant of the current inflationary environment in China and management’s assertion that some of the charges and write-downs were more or less one-time events, we do believe the company is facing increasing margin pressure and would like to see greater cost-management discipline.

Growth story unchanged Despite the subpar quarterly performance, we believe China Valves remains a compelling growth story. The fear related to the Japanese nuclear crisis notwithstanding, we continue to believe the company enjoys a viable and growing market, both

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Rodman & Renshaw on CVVT                 01/18/2011

Maintain Market Outperform Rating after the Company’s Response to Allegations 

China Valves Technology (“China Valves”, Ticker: CVVT, Market Outperform) responded to some internet allegations of impropriety mostly related to some of its past acquisitions by first releasing a written rebuttal last Friday and then hosting a conference call this morning.

Company response and explanations 

Among other things, China Valves categorically denied allegations that its acquisition of Changsha Able Delight was an improper related party transaction and it might have inflated the financial performance of the unit since the acquisition. The company provided detailed explanations of the indirect purchase of the Changsha unit from Watts Water Technologies (WTS, Not Rated) and offered supporting arguments on its financial projections of the Changsha unit. It also maintained that its Pudong Hanwai acquisition, especially with regard to its ownership structure, was proper. The company indicated that it had $28.9 million of cash at the end of December, and that it was not “running short of cash.” It also continued to indicate that it would retain a Big 4 auditor after the current reporting period.

Our view 

We are by and large comfortable with the company’s response. The company’s explanation on the Able Delight acquisition appears reasonable (especially when considering the unit’s state of operation immediately prior to the acquisition, the large back order, and the business reshuffling since the acquisition), and the Hanwei purchase also does not appear to be self-dealing. In our opinion, while there are certainly areas that the company can and should improve upon, particularly with regard to internal control and timely disclosure, its acquisitions of Able Delight, Yangzhou Rock, and Hanwei were legit and made business sense for the company. In fact, based on our due diligence and channel check, we believe China Valves’ underlying business is not only real, but also experiencing robust growth.

Looking forward, we believe retaining the independent auditing service of a Big 4 firm will be critical for the company to remove any significant lingering doubt on the company. We recognize that the business environment in China is vastly different from that of the U.S, which might make many corporate practices (such as timely disclosure) that are common in the U.S. somewhat more difficult for Chinese companies. However, as a U.S. publically traded company, it is not only China Valves’ obligation but also its own interest to further improve its internal control, provide timely disclosure, and engage in more independent appraisals and obtain fairness of opinions on acquisitions. We hope this current turbulence will serve as a lesson for the company on its way to becoming a dominant industrial valve manufacturer in China.


Notice Regarding Privacy and Confidentiality: 

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

ZHENGZHOU, China, Jan. 5, 2011 /PRNewswire-Asia-FirstCall/ -- China Valves Technology, Inc. today announced that the Company has entered into a definitive agreement with certain purchasers to sell in a registered direct offering an aggregate of 1,000,000 shares of its common stock at a price of $10.00 per share for gross proceeds of approximately $10 million.

The net proceeds of the financing will be used to build a manufacturing facility for big size ball valves used for nuclear power plants. In addition, the Company will issue to the purchasers warrants to purchase an aggregate of 250,000 shares of common stock at an exercise price of $10.00 per share, exercisable for 180 days beginning on the date of the initial issuance of the warrant.

ZHENGZHOU, China, Dec. 27, 2010 /PRNewswire-Asia-FirstCall/ -- China Valves Technology, Inc.  today announced it has approved to replace Frazer Frost LLP with one of Big Four audit firms as its new independent auditor. Frazer Frost LLP continues to serve as the Company's auditor until Form 10-K for the fiscal year 2010 is filed.

Rodman & Renshaw on CVVT                                  12/23/2010

Encouraged by the Recent Series of Positive Corporate Developments 

China Valves Technology (“China Valves”, Ticker: CVVT, Market Outperform) announced a series of corporate developments over the past 3 weeks. While we believe a major motivation behind such an effort was to stave off an increase in short interests, we are nevertheless encouraged by the company’s proactive and shareholder friendly stance. In our opinion, these developments underscore China Valves’ strong fundamentals, and we continue to view the company as a solid growth story. In this regard, we are reiterating our Market Outperform rating on the shares of China Valves. In fact, within our coverage universe, it is our top pick for 2011.

New CFO announced: China Valves appointed Mr. Gang Wei as its new CFO, effective December 16, 2010. Judging from his professional background, we believe Mr. Wei is well qualified for the position. Before joining the company, he held multiple senior management positions in both state-owned enterprises and international companies, with extensive experience in financial reporting, budgeting, forecasting, and internal control. Mr. Wei holds a doctorate degree in Finance from Cardiff Business School of Cardiff University and a master’s degree in accounting from Shanghai University of Finance and Economics. He also holds a Chinese CPA certificate, an ACCA certificate, a CFA designation, and a Hong Kong CPA certificate. We expect the appointment of Mr. Wei will further strengthen China Valves’ corporate management, especially in improving its financial management, internal control, as well as the company’s communication with the investment community. We hope the company will be able to retain the service of Mr. Renrui Tang, the acting CFO prior to the arrival of Mr. Wei. As a company veteran, Mr. Tang provides valuable experience and expertise in the company’s financial and accounting management and serves an integral role on China Valves’ senior management team.

Auditor issue: In light of the problems that the company’s current auditor, Frazer Frost LLP, is facing for its work on some other Chinese companies, it has become almost a necessity for China Valves to address its auditor issue. During a well-attended analyst day held on December 10, the company indicated that it had extensive discussions with major international auditing firms with regard to a possible auditor upgrade. Considering the year-end timing, the company announced that it would retain its current auditor, for its 2010 annual report. However, it intended to have a top 5 auditing firm to unofficially “joint” audit its year end results, thus providing a smoother transition when the company officially changes auditors next year. We can understand and accept this approach. However, in light of December 20 settlement between the SEC and Moore Stephens Wurth Frazer & Torbet that effectively barred the auditor from accepting any new Chinese client, we would not be surprised if China Valves were to take on an even more aggressive approach in the timing of its auditor upgrade in order to avoid further “guilty by association.”


Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

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Rodman & Renshaw on CVVT

3Q10 results beat estimates again
Similar to the previous quarter, China Valves’ 3Q10 earnings were well above our and Street expectations. Net revenue for the quarter was $55.3 million, much higher than our expectation of $49.1 million and Street consensus of $49.3 million. Non-GAAP net income was $15.6 million, far above our Street-high expectation of $13.2 million and Street consensus of $12.5 million. Non-GAAP EPS for the quarter was $0.44, also easily beating our Street-high estimate of $0.38 and $0.36 Street consensus. 

2010 guidance increased
The company also provided a financial outlook update for the remainder of 2010. In light of the RMB500 million ($73 million) backlog at the end of September, China Valves now expects to realize RMB300 million ($44 million) of sales and $11 million of net income in 4Q10. As a result, the company increased its 2010 net income guidance to $47 million from the previous $40 million. 

Adjusting 2010 and 2011 projections
We are adjusting our financial projections for both 2010 and 2011 based on the 3Q10 performance and company’s updated guidance. We now estimate that China Valves will generate net revenues of $175.7 million for 2010 and $226.8 million for 2011, representing a 2008-2011 revenue CAGR of 50.5%. We estimate non-GAAP net income will reach $47.8 million in 2010 and $58.3 million in 2011, representing a CAGR of 75.7% between 2008 and 2011. These figures correspond to respective non-GAAP diluted EPS of $1.37 and $1.64 for 2010 and 2011, and three-year EPS CAGR of 91.3%. 

Reiterating Market Outperform rating and price target of $21
We are reiterating our Market Outperform rating and price target of $21 on the shares of China Valves. In our opinion, as the largest industrial valve manufacturer in China, China Valves has one of the strongest business fundamentals in our coverage universe, and the stock remains our top pick. Our price target is now based on the shares trading at 13x our 2011 EPS estimate of $1.64, corresponding to a PEG ratio of 0.6. The 13x multiple represents 21% discount to the 15.7x average 2011 P/E ratio of the company’s 10 international valve manufacturer peers currently trading on U.S. stock exchanges. With its strong state of operation and growth potential, we believe the company justifies such a valuation. 

Risks
Major risks to our rating and price target include macroeconomic risks, competition from both domestic and foreign competitors, business execution risks, fluctuation of raw material prices, and political and regulatory risks related to operating in China.


Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

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Third Quarter 2010 Highlights

• Third quarter net revenue reached $55.3 million, up 97.8% year-over-year.

• Gross profit increased to$25.1 million, up 82.4% year-over-year.

• Net income reached $15.9 million, or $0.45 per fully diluted share, up from $3.8 million, or $0.12 per fully diluted share, for the third quarter of 2009.

• Adjusting for non-cash items related to the change in fair value of warrant liabilities and non-cash compensation expense related to the release of make good shares from escrow, adjusted net income was$15.6 million, or $0.44 per diluted share, compared with adjusted net income of $7.4 million, or $0.21 per diluted share, for the third quarter of 2009.
  

"The third quarter was another record breaking quarter for China Valves as we nearly doubled our sales year-over-year due to the contribution of our acquired subsidiaries and strong demand from our end-user customers in the thermal power generation, water supply and petrochemical, oil and gas sectors. With support from our Shanghai Pudong Hanwei Valve Co., Ltd. (“Hanwei Valve”), we have continued to gain ground in the petrochemical, oil and gas sectors,” said Mr. Jianbao Wang, CEO of China Valves. "During the quarter, we restructured our production to optimize the utilization of our various factories by shifting sales from Henan Kaifeng High Pressure Valve Co., Ltd. (“Kaifeng Valve”) and Zhengzhou City Zhengdie Valve Co., Ltd. (“Zhengdie Valve”) to the newly acquired Able Delight (Changsha) Valve Co., Ltd. (“Changsha Valve”) and Hanwei Valve. Integrating the sales of our different subsidiaries further is our current priority. "

Business Outlook

The Company expects to improve sales efficiency through consolidation of sales of its subsidiaries, cross-regional promotion, and further diversification of end-user industries. In the upcoming months, the Company expects to see a growing contribution from Hanwei Valve in sales in the petrochemical, oil and gas sectors. As of September 30, 2010, the Company’s backlog was around RMB 500 million (approximately $73 million), of which it expects to realize RMB 300 million (approximately $44 million) in the fourth quarter of 2010. As such, the Company expects to generate approximately $11 million in net income for the fourth quarter of 2010.

“Given the strong performance of our new subsidiaries, we expect to outperform our previous guidance of $40 million in net income for 2010 by approximately $7 million. Looking forward towards 2011, we remain confident in the growth opportunities with our end-user markets and in our position as an industry leader. We expect to further strengthen the performance of our new subsidiaries as we continue to integrate sales practices and improve manufacturing efficiency of our companies. As a result, we target around 30% revenue growth for 2011 excluding any additional acquisitions.”

Rodman & Renshaw on China Valves Tech

The share price of China Valves Technology ("China Valves",Ticker: CVVT, Market Outperform) has retreated by more than 30% since the beginning of August, punctuated by the 9% drop earlier today due to some market commentaries. In our opinion, the business fundamentals of China Valves remain strong and the stock remains one of our top picks. We believe the share price weakness should only create more attractive entry levels for long term investors. 

Based on our available information on the Chinese valve industry, China Valves is already the largest player in this space that includes both state-owned and private enterprises. Its acquisitions of Yangzhou Rock, Able Delight, Shanghai Hanwei, and TaiDe have made the company a truly national player with industry leading production capacity and technology (please see Exhibit 1 in this report for acquisition summary). Among its many industry-leading achievements, the company produced China’s first high-pressure large diameter oil pipeline valves and first 600MW power station steam gate valves, and is still the country’s sole designer of 1000MW power station steam gate valves and the sole manufacturer of China’s largest butterfly valves with diameter of 5,500mm. We believe the company will continue to grow and prosper in the rapidly expanding Chinese industrial valve market.

We view China Valves’ management as one of the stronger teams among U.S-listed Chinese small cap companies. The Chairman and founder of the company, Mr. Siping Fang, is the president of the Chinese Valve Industry Association and brings more than 20 years of industry experience. The company’s General Manager (and de facto CEO), Mr. Jianbao Wang, is a professional manager, and enjoys substantial managerial autonomy – a rarity among small cap Chinese companies, in which outsiders (not family members) typically have no core decision making power. We believe this arrangement speaks volumes about the company and its chairman’s vision and aspirations. The company’s current acting CFO, Mr. Renrui Tang, is a veteran of the company, having spent more than 15 years with China Valves. While Mr. Tang lacks English language skills, his accounting competency and industry knowledge more than compensates such a weakness. And the fine English skills of Mr. Wang and other managers at the company should prove sufficient when communicating with the investment community.

We would also like to highlight the fact that the company, as of the end of last quarter, had $6.8 million of net cash (excluding restricted cash), and has been generating positive free cash flow since the beginning of 2009. In addition, we expect the company will continue to enjoy robust sales and profit growth in the foreseeable future. Trading at less than 5x our expected 2011 EPS, we believe the valuation is compelling. Therefore, we reiterate our Market Outperform rating and $21 price target on the shares of China Valves. We believe the current market pessimism on Chinese small cap companies creates more attractive entry points for investors with a long term horizon. We believe when the dusts settle, strong companies with sound business fundamentals will not only survive, but also prosper. And we are confident that China Valves is such a company.

Notice Regarding Privacy and Confidentiality:  

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

  Second Quarter 2010 Highlights:

• Second quarter net revenue reached $49.3 million, up 97.5% year-over-year.
• Gross profit increased to $23.0 million, up 84.0% year-over-year.
• Net income reached $14.3 million, or $0.41 per fully diluted share, up from $0.2 million, or $0.01 per fully diluted share, for the second quarter of 2009.
• Adjusting for non-cash items related to the change in fair value of warrant liabilities, adjusted net income was $13.5 million, or $0.39 per diluted share, compared with adjusted net income of $7.7 million, or $0.25 per diluted share, for the second quarter of 2009

"China Valves achieved record financial results this quarter, reflecting the strong demand for the products of our original subsidiaries and our recent acquisitions. In addition to enriching our product portfolio, our acquisitions have brought us a larger and more diverse customer base," said Mr. Siping Fang, Chairman and CEO of China Valves. "This quarter we focused primarily on our core markets in the thermal power generation and water supply sectors, while also developing our presence in the petrochemical, oil and gas, and nuclear sectors. Given our financial performance thus far and the current market environment, we are confident of our strong performance in 2010."

So far, the Company has been successful in executing its growth plan, which includes improving sales efficiency through increased consolidation of sales of its different subsidiaries, geographic diversification for product promotion, and diversification of end-user industries. The Company's backlog at the end of July 2010 is around RMB 600 million (approximately $87.9 million), which it expects to realize by the end of this year.

Given the variations in gross margin for the Company's different products and operating subsidiaries, the Company experiences fluctuations in gross margin from quarter to quarter.

"Integrating our newly acquired subsidiaries and consolidating their sales is our key focus for the remainder of 2010. We expect to see increased contribution from our newest subsidiary Shanghai Hanwei in the second half of 2010, which will also substantially increase our exposure to the fast-growing petrochemical industry. While we enhance the operations of our existing operating subsidiaries, we will also continuously assess potential acquisitions that will improve our competitive strengths," said Mr. Fang.

The Company reiterates its net income guidance of $40 million for fiscal year 2010. (This implies aboout $20.0 million in adjusted net income. The company reported adjusted net income of $13.7 million and EPS of $0.44 in the second half of 2009).

"Although we passed the midpoint of our guidance six months into the year and have a solid backlog, we choose to remain conservative at this time and will continue to provide regular updates to investors on our business," concluded Mr. Fang.

Rodman & Renshaw Update:

2Q10 results blew away estimates. China Valves announced its 2Q10 earnings that were well above our and Street expectations. Net revenue for the quarter was $49.3 million, much higher than our expectation of $40.4 million and Street consensus of $39.7 million. Non-GAAP net income was $13.5 million, well above our expectation of $10.6 million and Street consensus of $10.7 million. Non-GAAP EPS for the quarter was $0.39, also easily beating our (and Street consensus) estimate of $0.31. The company maintained its previous net income guidance of $40 million for 2010. 

A major reason for the strong performance was revenue contribution of $20.5 million from the three recently acquired subsidiaries: Yangzhou Rock, Able Delight, and Shanghai Hanwei. Hanwei alone contributed $8.6 million of revenue for the quarter. Excluding the contribution from acquisitions, the revenue grew at 15.6% YoY. Gross margin for the quarter was 46.7%, below our estimate of 50.5%, largely pulled down by the three new acquisitions that still need to improve production efficiency through raw material waste reduction. Actual expense items were overall mostly in-line with expectations with G&A expenses of $3.0 million, selling expenses of $2.8 million, and R&D expenses of $80,729. Non-GAAP net income margin was 27.4%, slightly higher than our forecast of $26.2%.

We are certainly encouraged by this earnings report. We had anticipated a blow-out Q1 performance. Due to later-than-expected closing of the Hanwei acquisition (dragged to the beginning of April from the end of March as originally planned), the positive surprise was effectively delayed to 2Q10. The three acquisitions, in our opinion, should provide significant upside to the company’s top- and bottom-lines in the coming quarters. Hanwei, in particular, also brings sophisticated patented technologies and potentially higher profit margins. We believe China Valves’ operations are right on track, and continue to expect solid Q3 and Q4 results, especially in light of the announced $87.9 million backlog to be realized as revenue by the end of 2010. In terms of macro environment, while there are concerns regarding the Chinese economic slowdown in general and the end of the RMB4 trillion stimulus package in particular, we believe the market for China Valves is sufficiently large. Thus we do not expect any material near to medium-term macro-induced weakness for the company. 

Adjusting 2010 and 2011 projections In light of the quarterly performance, we are adjusting our financial projections for both 2010 and 2011. We now estimate that China Valves will generate net revenues of $166.1 million for 2010 and $204.9 million for 2011, representing a 2008-2011 revenue CAGR of 45.9%. We believe management’s $40 million 2010 net income guidance is conservative, and we now estimate net income (non-GAAP) will reach $43.4 million in 2010 and $53.8 million in 2011, representing a CAGR of 71.0% between 2008 and 2011. These figures correspond to respective diluted EPS (non-GAAP) of $1.25 and $1.53 for 2010 and 2011, and three-year EPS CAGR of 86.8%

The Company's main growth initiatives for 2010 involve consolidating sales of different subsidiaries through sales headquarters in Shanghai to improve sales efficiency, promote products across different regions, increase synergies between operating subsidiaries, increase sales to the petrochemical industry, and optimize valve designs to reduce waste from the casting process. The Company also continues to seek and evaluate potential acquisitions.

"So far in 2010, we have a number of milestones to celebrate as we continue executing our growth strategy. The acquisition of Hanwei Valve is an important step towards diversifying our product portfolio by adding sophisticated products and patented applications. It will improve our position in key end-user markets such as the petrochemical industry, help us enter new end-user markets such as bioengineering, and strengthen our distribution network in our core end-user markets in water supply and power generation sectors. Moreover, we believe that increased collaboration between our different subsidiaries in combination with our trailblazing products will make 2010 a highly successful year for China Valves," concluded Mr. Fang.

The Company reiterates its net income guidance of $40 million.

Comments and guidance remain strong. Unless there is an equity offering around the corner, we see no reason for the share weakness. Some investors may view a Chinese stock with a trailing P/E of 16 to be pricey. However, we believe that investors may gradually begin to become comfortable to assign these companies P/E's closer to 25.

"China Valves had a very successful year in 2009. We achieved strong financial performance, closed a successful acquisition, raised $24.7 million in capital and listed our stock on the NASDAQ Global Market. Our robust sales in the fourth quarter, especially to the power supply and water supply industries, allowed us to exceed our net income guidance for the year," said Mr. Siping Fang, the Chairman and CEO of China Valves. "Moreover, we made significant strides towards the end of the year in executing on our growth strategy through identifying and negotiating with new acquisition targets to drive our future growth."

The Company reaffirms its previously issued guidance of $40 million in net income for 2010. The guidance includes the impact of the acquisition of Hanwei Valve, which the Company expects to close shortly, but does not include the impact of any additional potential acquisitions. This guidance excludes the impact of non-cash compensation expenses, if any, related to the release of make good shares and changes in fair value of derivative instruments.

Source: PR Newswire (March 29, 2010)

Supported by governmental infrastructure spending especially on municipal water supply and drainage projects and a replacement cycle within power plants, China Valves expects to see continued demand for high-end valve products in 2009 and 2010. Moreover, the Company expects to see accelerated growth from the nuclear power industry in the future.

"Given our adjusted year-to-date net income of $18.5 million, we are very well positioned to meet our guidance for 2009. Because of many of our customers slowing orders in the last months of the year in anticipation of reduced capacity utilization in the first quarter for the Chinese New Year holiday, we expect our fourth quarter to be slightly slower than our third quarter," said Mr. Fang, "In 2010, we expect growth to come from our expansion in manufacturing capacity throughout 2009, which includes the construction of a new facility, upgrades to existing production capacity, and two completed acquisitions. Moreover, we are constantly evaluating new acquisition targets that complement our existing business and that expand our product offerings and exposure to growing end-user markets."

Source: PR Newswire (November 13, 2009)

'For the second quarter we achieved exceptional year-over-year top and bottom line growth driven by strong demand for our higher end products and a streamlined selling process and expense controls put in place earlier this year. While the favorable comparisons are partially due to delayed shipments and lower sales in the second quarter of 2008 because of the earthquake in Sichuan province, these results provide us with confidence that we are on track to achieve our financial goals for 2009 as we head into what are normally the seasonally strongest quarters for our industry,' said Mr. Siping Fang, Chairman and CEO of China Valves.

Due to increased governmental spending, China Valves expects to see continued demand for high-end valve products from domestic infrastructure and power generation projects. The water supply and drainage and nuclear power sectors should increase demand for the Company's high-end, high-margin products, such as forged steel valves for nuclear power stations and two-way metal sealing butterfly valves for water supply systems. The Company has applied for the license required to produce valves used in the core island of nuclear power stations, and expects to obtain the approval from the government by the end of 2009. Consequently, the Company expects gross margin for second half of 2009 will remain at the same level of second quarter of 2009.

As of June 30, 2009, the Company's backlog was RMB 280 million, or approximately $41 million. For the full year 2009, the Company remains confident in meeting the target of annual net income of $23 million and fully diluted earnings per share of $0.738 on a post-split basis.

Full Year Fiscal 2008 Guidance Ending December ^a

Source: PR Newswire (August 14, 2009)  

^aThe above forecasts reflect the Company's current and preliminary views and are therefore subject to change. Please refer to the Company's Safe Harbor Statement (usually in press releases) for the factors that could cause actual results to differ materially from those contained in any forward-looking statement. EPS numbers have been adjusted for a 1 for 2 reverse split.

^b Non-GAAP EPS figures generally exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . For a more complete explanation of the company's definition of non-GAAP please refer to its financial press releases. The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures.

'We had solid operational performance and financial results in the first quarter of 2009. Most of the orders which we filled in the first quarter of 2009 were placed in the fourth quarter of 2008, when there already were clear signs of a domestic economic slowdown. In the first quarter of 2009, demand remained strong for our metal valve products used in civil infrastructure projects. We continued throughout the quarter to position ourselves for further growth by manufacturing new and increasing amounts of high quality, high technology valves. We expect demand for our products to grow as China's announced economic stimulus programs begin to take effect and the domestic economy recovers,' said Mr. Siping Fang, Chairman and CEO of China Valves.

Full Year Fiscal 2008 Guidance Ending December

* EPS Figures exclude non-operating gains and losses. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information.For a more complete explanation of the company's definition of non-GAAP please refer to their first quarter financial press release.

Source: PR Newswire (May 15, 2009)

Guidance Report: 

'While our fourth quarter results came in below our expectations, we achieved record financial results in 2008 and exceeded our make good target of $10.5 million in net income, excluding non-cash charges. We believe China's valve market will fare better than other industries in the wake of the weakening global economic environment due to government support of large infrastructure construction projects and demand related to rebuilding the earthquake-affected areas in Sichuan province,' commented Mr. Siping Fang, Chairman and CEO of China Valves.

The Company expects gross margin to improve in first half of 2009, as selling prices have remained stable, while raw materials prices declined significantly in the fourth quarter of 2008.  The company remains focused on meeting the targeted net income established in the make good escrow agreement related to the August 2008 private placement.

Full Year Fiscal 2008 Guidance Ending December

* EPS Figures exclude non-operating gains and losses. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information.For a more complete explanation of the company's definition of non-GAAP please refer to their fourth quarter financial press release.

Source: PR Newswire (March 17, 2009)