GSI's subsidiary Longmen did roll up two local mills, and now stands to grow threefold in the next two years, but as that is still a little cloudy, let's look at Longmen as it stands.
2 blast furnaces are creating 10,000 metric tons of steel per day, twice last years run rate. They are doing so with less employees, less energy and more efficiency.
A substantial portion of their resources come from the Daxigou mine, which they basically own, and have first rights of refusal, not to mention the rails to ship the goods to the mill.
Under the "Go West" Chinese movement, they recieve a deeply discounted tax rate, ~12%.
A direct selling campaign is really taking flight, accounting for a substantial portion of their sales, at a higher profit.
Longmen accounts for 90% of their revenue. I think the other companies will do just fine, but let's keep the focus on Longmen. They saw a +12.3% boost in margins Q over Q, and that momentum should continue for the next several quarters.
Longmen sells only in Western China, has a +70% market share in 16 provinces with 350 million people. Due to the stimulus plan and the earthquake, they will be fully booked for the next several years. Without expansion, they should book $1.5 billion in revenue this year. Apply a conservative 7% margins to that for 2009, and they will have $105 million in profits this year. Not bad for a $230 million company.
GSI SHOULD be $15+ as is, and any acquisitions will only raise that number, provided they are done properly.
