FAST NEWS: Huadi Signs Strategic Agreement With Key PetroChina Contractor

The Latest: Stainless steel pipe maker Huadi International Group Co. Ltd. (HUDI.US) said on Thursday it has signed a strategic partnership agreement with a key construction contractor of China National Petroleum Corp. (PetroChina), China’s largest oil producer.

Looking Up: Huadi could win major business through its new position as a first-tier supplier of stainless steel seamless pipes and tubes to China Huanqiu Contracting & Engineering Co.

Take Note: Huadi may need to compete with many of Huanqiu’s other first-tier suppliers, which could force it to lower its prices and limit the new partnership’s profit potential.

Digging Deeper: Huadi makes steel pipes, and raised $25 million in its U.S. listing in 2021. The company’s revenue grew 23% to $36.8 million in the six months to March 31 last year. It posted a $9,150 net loss for the period, reversing a $642,000 profit a year earlier. The swing appeared related to a drop in government grants the company received in the latest period. Huadi may also be feeling the impact from a sharp slowdown in new building construction as China’s property market experiences a sharp slowdown after years of breakneck growth.

Market Reaction: Huadi’s stock rose 10.6% on Thursday after the announcement came out. The stock is up about 27% year to date.

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Reporting by Doug Young