JINZHOU CITY, China, Aug 06, 2008 /Xinhua-PRNewswire-FirstCall via COMTEX/ ----Wonder Auto Technology, Inc. (Nasdaq: WATG) ("Wonder Auto" or the "Company"), a leading manufacturer of automotive electrical and suspension parts in China, today announced record quarterly financial results for the second quarter ended June 30, 2008.

 Q2 Highlights: -- Sales revenue increased 55.6% year-over-year to a record US$36.7 million -- Gross profit rose
   faster at 68% year-over-year to a record US$9.5 million -- Net income increased 37.4% year-over-year to US$5.3 million --
   Export sales represented 14% of the higher total revenues -- EPS rose 25% over same period last year to US$0.20, on 3 million
   more weighted average shares outstanding. 

Second quarter sales revenue rose to a record US$36.7 million, a 55.6% increase from the 2007 second quarter revenue of US$23.6 million. The sales revenue increase was primarily due to the increased demand for the Company's alternators and starter products from OEMs in China.

With the rising price of gasoline, Chinese consumers regained interest in small-sized automobiles. As a result, the smaller engine market continued to demonstrate solid growth in the first half of 2008. This growing market trend benefited the sales of Wonder Auto's high performance alternators and starters for smaller engines. Additionally, the central government has initiated a number of incentives and policies to encourage the purchase of smaller vehicles with low-emission engines to help the environment. In addition, the Company's sales growth also benefited from the strong sales growth of its key customers. After a lackluster 2007, Beijing Hyundai staged a robust comeback and posted a record setting 50% year-over-year unit sales growth.

2008 second quarter gross profit increased 68% to a record US$9.5 million from a gross profit of US$5.7 million in the same quarter of 2007. Gross margin was 25.9% in the 2008 second quarter compared with 24.0% for the same period last year. The gross margin increase was a combination of higher sales in the 2008 second quarter generating greater economies-of-scale than a year ago and effective cost saving programs. Additionally, the Company's research and development continues to develop technology and methods to lower raw material usage and component consumption per unit of production.

Operating expenses for the 2008 second quarter were US$2.7 million as compared to US$1.8 million in the same period of 2007, reflecting a 48.4% increase. The higher expenses were mostly from more administrative spending primarily because of the consolidation of Jinzhou Hanhua and Jinzhou Karham since the first quarter of 2008, and the increased professional expenses of being a public company. Because both companies are Wonder Auto's suppliers, the addition of these two companies increased our administrative costs, but did not increase the sales revenue. As a percentage of sales revenue, administrative expenses remained at 3.9% of sales for the three months ended June 30, 2008, the same percentage as in the 2007 quarter. Selling expenses of US$994,993 were higher in the second quarter due to the increased warranty provision reflecting higher sales, greater sales commission and more traveling expenses due to increased gas prices. The selling expenses were 2.7% as a percentage of revenue in the 2008 quarter compared with 3.0% in the 2007 second quarter. Research and development costs increased to US$290,665 from US$214,174 for the same period in 2007. As a percentage of revenue, research and development costs were 0.8% in the second quarter. The investment in research and development is expected to continue to rise and remain around 1% of sales revenue.

Income from operations was US$6.8 million, a 77.4% increase from US$3.8 million in the second quarter of 2007.

Net income increased 37.4% to a quarterly record of US$5.3 million from US$3.8 million in the same quarter of 2007. Fully diluted earnings per share for the second quarter were US$0.20 versus US$0.16 in the 2007 second quarter. As of June 30, 2008, the weighted average number of shares outstanding on a diluted basis increased by 12.5% to 26,959,994 shares, as compared to 23,959,994 diluted shares outstanding in the same quarter of 2007.

"We continued our strong growth in the 2008 second quarter as starter sales were strong and export sales augmented our growth in the Chinese domestic market. Our investment into our new facilities provide us with more production capacity for further expansion, as we are targeting bigger customers and additional new markets," said Chairman and CEO, Mr. Qingjie Zhao.

Financial Condition

As of June 30, 2008, Wonder Auto had US$28.4 million in cash and cash equivalents (including US$6.0 million restricted cash), a current ratio of 1.9 to 1, working capital of US$55.0 million and US$19.4 million long-term debt. Shareholders' equity increased to US$91.4 million. Net trade receivables rose in the second quarter reflecting the higher sales volumes and inventories also increased to accommodate future sales growth. Wonder Auto is also building new facilities. As of June 30, the value of its buildings rose to $11.4 million from $6.9 million at December 31, 2007 and plant and equipment rose to $27.2 million from $20.1 million at the end of 2007.

Events Overview

In April 2008, Wonder Auto's Board of Directors adopted the 2008 Equity Incentive Plan. As part of the Plan, the compensation committee of the Board granted stock options to approximately 65 Wonder Auto managers to be vested upon the achievement of pro forma net income results, approximating 40% annual growth, over the next three years. Such plan was approved by shareholders at Wonder Auto's 2008 annual meeting of stockholders.

Wonder Auto announced that is has joined the Russell 2000 Index when Russell Investments changed its indexes on June 27, 2008.

During the second quarter, the Company also made investor presentations at the Roth 3rd Annual China Discovery Tour and the Piper Jaffray Industrial Growth Conference.

At the 2008 Annual Meeting of Stockholders held on Friday, June 20, 2008 in Beijing, Mr. Qingjie Zhao, Wonder Auto's Chairman and Chief Executive Officer, Mr. Meirong Yuan, the Company's Chief Financial Officer and Treasurer, Mr. Larry Goldman, Mr. David Murphy, and Mr. Xingye Zhang, were all re-elected to the Board of Directors. Also, the Wonder Auto Technology, Inc. 2008 Equity Incentive Plan was approved by shareholders, and PFK Hong Kong, Certified Public Accountants, was ratified as the Company's independent registered public accounting firm.

Wonder Auto announced it will exhibit at the Automotive Aftermarket Products Expo (AAPEX), at the Sands Expo Center in Las Vegas, Nevada, between November 2-4, 2008. Wonder Auto will highlight its advanced starter and alternator products, especially those designed and targeting the global markets, as well as its suspension parts. The AAPEX exhibition is the world's largest trade event for the automotive aftermarket.

Business Outlook

For the third quarter to end September 30, 2008, the Company expects sales revenues to grow strongly to US$39.0 million with the gross margin to exceed 25.5%.

Conference Call

The Company will host a conference call, to be simultaneously Webcast on Thursday, August 7 at 8:30 a.m. Eastern Daylight Time / 8:30 p.m. Beijing Time. A question and answer session will follow the management presentation. Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (CFO), Miss Lydia Zhao (assistant CFO) and Mr. Yuechun Xie (Investor Relations Manager) will be the primary speakers for the call.

To participate, please call the following numbers ten minutes before the call start time:

 Phone Number + 1 (877) 407-9210 (North America) Phone Number + 1 (201) 689-8049
   (International) 

A live Webcast of the conference call will be available on the Investor Relations page of Wonder Auto's web site at http://www.watg.cn . Please visit the Web site at least 15 minutes early to register for the Webcast and download any necessary audio software.

A replay of the call will be available through Thursday, August 21, 2008, at 11:59 p.m. Eastern Daylight Time/11:59 a.m. Beijing Time, on August 22. For the replay, please call:

 Phone Number
   +1 (877) 660-6853 (North America) Phone Number +1 (201) 612-7415 (International) Account Number: 286 Conference ID Number:
   292425 

About Wonder Auto

Based in Jinzhou City, Liaoning, China, Wonder Auto Technology, Inc., through its Chinese subsidiaries, designs, develops, manufactures and sells automotive electrical parts and suspension products. Wonder Auto was ranked second in sales revenue in the China market for automotive alternators and starters in 2006. With respective 5 different series and over 150 models of alternators, 70 models of starters and various suspension related parts, the Company supplies to a wide range of automakers, engine producers and auto parts suppliers both in domestic China and overseas. Wonder Auto's main customers include Beijing Hyundai Motor Company, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co. Ltd., Harbin Dongan Automotive Engine Manufacturing Co., Ltd., and Tianjin FAW Xiali Automotive Co., Ltd. For more information, please log on to http://www.watg.cn .

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, among others, those concerning our business outlook and expected income from newly executed agreements as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products, product defects and any related product recall; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors and risks mentioned in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2007 and any subsequent SEC filings. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

 Wonder Auto Technology,
   Inc. Condensed Consolidated Statements of Income and Comprehensive Income For the three and six months ended June 30, 2008
   and 2007 (Unaudited) (Stated in US Dollars) Three months ended Six months ended 30-Jun 30-Jun (unaudited) (unaudited) 2008
   2007 2008 2007 Sales revenue $36,658,896 $23,555,638 $67,775,603 $45,122,434 Cost of sales (27,154,953) (17,899,115) (50,098,889)
   (34,150,905) Gross profit 9,503,943 5,656,523 17,676,714 10,971,529 Operating expenses Administrative expenses 1,428,980 910,106
   2,767,353 1,576,672 Research and development costs 290,665 214,174 668,222 477,620 Selling expenses 994,993 704,999 1,702,850
   1,356,615 2,714,638 1,829,279 5,138,425 3,410,907 Income from operations 6,789,305 3,827,244 12,538,289 7,560,622 Interest
   income 54,684 38,068 167,154 54,777 Other income 308,263 15,531 413,326 39,326 Government grants -- 786,154 -- 786,154 Finance
   costs (621,314) (592,890) (1,687,486) (1,012,282) Equity in net income of an unconsolidated affiliate 225,122 -- 225,122 34,147
   Income before income taxes 6,756,060 4,074,107 11,656,405 7,462,744 Income taxes - Note 4 (796,426) 34,090 (1,227,243) (432,724)
   Minority interests (693,734) (276,706) (1,177,479) (486,077) Net income $5,265,900 $3,831,491 $9,251,683 $6,543,943 Other
   comprehensive income Foreign currency translation adjustments 1,502,606 709,413 3,691,508 1,076,742 Comprehensive income $6,768,506
   $4,540,904 $12,943,191 $7,620,685 Earnings per share: basic and diluted $0.20 $0.16 $0.34 $0.27 Weighted average number of
   shares outstanding: basic and diluted 26,959,994 23,959,994 26,959,994 23,959,994 Wonder Auto Technology, Inc. Condensed Consolidated
   Balance Sheets As of June 30, 2008 and December 31, 2007 (Stated in US Dollars) June 30, December 31, 2008 2007 (Unaudited)
   (Audited) ASSETS Current assets Cash and cash equivalents $22,376,705 $26,102,993 Restricted cash 6,036,175 8,613,262 Trade
   receivables (net of allowance of doubtful accounts of $56,231 in 2008 and $37,071 in 2007) 49,436,853 38,124,411 Bills receivable
   11,065,438 11,766,478 Advances to staff 360,704 314,964 Other receivables, prepayments and deposits 4,888,201 1,320,483 Inventory
   20,818,962 12,634,786 Amount due from a related company -- 74,822 Deferred taxes 253,968 307,338 Total current assets 115,237,006
   99,259,537 Intangible assets 17,953,146 16,873,051 Property, plant and equipment, net 31,164,423 22,516,900 Land use rights
   2,840,594 1,235,029 Deposit for acquisition of property, plant and equipment and land use right 4,730,907 2,072,458 Investment
   in a non-consolidated affiliate 5,225,122 -- Deferred taxes 706,623 439,760 TOTAL ASSETS $177,857,821 $142,396,735 LIABILITIES
   AND STOCKHOLDERS' EQUITY LIABILITIES Current liabilities Trade payables $18,683,127 $12,726,989 Bills payable 14,189,105 15,903,600
   Other payables and accrued expenses 2,870,885 2,413,140 Provision for warranty 1,523,729 1,124,655 Income tax payable 922,180
   666,589 Secured short-term bank loans 22,046,000 10,282,500 60,235,026 43,117,473 Total current liabilities Secured long-term
   bank loans 19,402,036 17,622,186 TOTAL LIABILITIES 79,637,062 60,739,659 COMMITMENTS AND CONTINGENCIES MINORITY INTERESTS
   6,835,175 3,214,683 STOCKHOLDERS' EQUITY Preferred stock: par value $0.0001 per share; authorized 10,000,000 shares, none
   issued and outstanding -- -- Common stock: par value $0.0001 per share; authorized 90,000,000 shares, issued and outstanding
   26,959,994 shares in 2008 and 2007 2,696 2,696 Additional paid-in capital 44,870,304 44,870,304 Statutory and other reserves
   4,857,660 4,857,660 Accumulated other comprehensive income 8,113,540 4,422,032 Retained earnings 33,541,384 24,289,701 TOTAL
   STOCKHOLDERS' EQUITY 91,385,584 78,442,393 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $177,857,821 $142,396,735 Wonder Auto
   Technology, Inc. Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2008 and 2007 (Unaudited)
   (Stated in US Dollars) Six months ended June 30 (Unaudited) 2008 2007 Cash flows from operating activities Net income $9,251,683
   $6,543,943 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 1,536,209
   929,352 Amortization of intangible assets and land use rights 58,020 26,500 Deferred taxes (164,912) (56,238) (Gain) loss
   on disposal of property, plant and equipment (1,205) 15,636 Provision for doubtful debts 15,676 8,923 Provision (recovery)
   of obsolete inventories 23,570 (57,493) Exchange loss on translation of monetary assets and liabilities 180,952 100,764 Equity
   net income of a non- consolidated affiliate (225,122) (34,147) Minority interests 1,177,479 486,077 Changes in operating assets
   and liabilities: Trade receivables (8,287,289) (3,214,204) Bills receivable 3,337,080 (6,669,000) Other receivables, prepayments
   and deposits (1,634,771) 194,470 Advances to staff (73,628) (289,359) Inventory (6,304,964) (195,332) Trade payables 4,432,755
   1,881,863 Bills payable (2,616,886) 880,741 Other payables and accrued expenses (2,210,222) 454,752 Amount due from a related
   company 78,516 -- Provision for warranty 318,877 (104,142) Income tax payable 221,870 (308,489) Net cash flows (used in) provided
   by operating activities (886,312) 594,617 Cash flows from investing activities Payments to acquire intangible assets (4,152)
   (326) Payments to acquire and for deposit for acquisition of property, plant and equipment and land use right (7,581,996)
   (3,247,305) Proceeds from sales of property, plant and equipment 85,533 11,171 Installment payment to acquire Jinzhou Dongwoo
   -- (2,420,000) Decrease (Increase) in restricted cash 3,025,786 (560,312) Net cash paid to acquire Jinzhou Hanhua (3,042,676)
   -- Net cash paid to acquire Money Victory (5,000,000) -- Net cash paid to acquire Jinzhou Karham (703,712) -- Net cash paid
   to acquire Fuxin Huirui (140,990) -- Net cash paid to acquire Jinzhou Wanyou -- (3,426,485) Net cash flows used in investing
   activities $(13,362,207) $(9,643,257) Cash flows from financing activities Dividend paid to minority stockholders $-- $(357,280)
   Dividend paid to Winning -- (343,934) New bank loans 16,643,208 18,939,379 Repayment of bank loans (6,987,856) (7,977,971)
   Net cash flows provided by financing activities 9,655,352 10,260,194 Effect of foreign currency translation on cash and cash
   equivalents 866,879 304,366 Net (decrease) increase in cash and cash equivalents (3,726,288) 1,515,920 Cash and cash equivalents
   - beginning of period 26,102,993 8,203,699 Cash and cash equivalents - end of period $22,376,705 $9,719,619 Supplemental disclosures
   for cash flow information: Cash paid for: Interest $1,117,712 $750,402 Income taxes $1,568,403 $493,508 For further information,
   please contact: Yuechun Xie Investor Relations Manager Wonder Auto Technology, Inc. Tel: +86-800-890-2596 Tel: +86-416-266-1186
   Email: ycxie@watg.cn Kevin Theiss Investor Relations Grayling Global Tel: +1-646-284-9409 Email: ktheiss@hfgcg.com Stacy Dimakakos
   Media Relations Grayling Global Tel: +1-646-284-9417 Email: sdimakakos@hfgcg.com 

SOURCE Wonder Auto Technology, Inc.

http://www.watg.cn 

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