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The battery business may be slow in developing in the U.S., but China is having no problem selling batteries as fast as it can make them. Yesterday, Advanced Battery Technologies (Nasdaq: ABAT ) announced another profitable quarter, something A123 Systems (Nasdaq: AONE ) , Ener1 (Nasdaq: HEV ) , and Valence Technology (Nasdaq: VLNC ) can't do.
Advanced Battery Technologies' revenue was up 46.4% to $25.6 million in the third quarter as demand for large-capacity batteries and scooters remained robust. Net income increased 118.8% to $11.1 million, and the company had $74.3 million in cash at the end of the quarter.
Demand for batteries and electric scooters was so strong that Advanced Battery Technologies will add capacity or pursue acquisitions, or both, to advance growth. That's a stark contrast to American battery companies, which are sitting on idle capacity waiting for demand to pick up.
Maybe most impressive was the $31.8 million in cash provided by operations for the first nine months of the year. Not bad for a company with only a $276.5 million market cap. Ener1, on the other hand, has been burning through cash and has had to offer additional shares just to keep up.
As we've seen with a lot of Chinese companies, there is always the asterisk. In the case of Advanced Battery Technologies, watch the diluted-share count, which increased to nearly 70 million from 61 million a year ago. Chinese companies are not known for being shareholder-friendly, so watch what management does closely. I haven't found any major red flags yet, but you never know when they might pop up.
The bottom line
As American companies struggle, the battery business continues to boom in China. So far it hasn't benefited shareholders, because the stock has gone nowhere in 2010, but this might be just what shareholders need to give this stock a boost going into 2011. I'm a little too skittish to pour my money into China right now, but I'll add Advanced Battery Technologies as an outperform call on Motley Fool CAPS to see where it goes.
What do you think? Is Advanced Battery Technologies a stock you would buy?
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