China’s healthy economy has created persistently strong demand for buses, trucks, and construction equipment. Our top choice to capitalize on this growth is China Yuchai International Limited (CYD, NYSE), China’s largest diesel engine manufacturer. The company offers a range of light-duty, medium-sized, and heavy-duty diesel engines for construction equipment, trucks, buses, and cars. It also produces diesel power generators for the construction and mining industries. ... The company’s name is a bit misleading as it’s actually a Bermuda company with its principal office located in Singapore. And though it’s primarily a China story today, Yuchai has a growing presence in 21 other countries, primarily in Southeast Asia and Africa. ...
With a market capitalization around $700 million, China Yuchai’s stock is trading hands at just 0.3 times sales, a little more than 1 times book value, and at a trailing price-to-earnings ratio of less than 7, making it a bargain on all accounts. China Yuchai’s sales and profits have grown at compound annualized rates of 22% and 14% during the last five years. We won’t venture a guess as to how they’ll fare going forward, but if it’s anything like the earlier numbers, investors will be amply rewarded for buying at today’s prices. In the meantime, the company has just $165 million in debt, and it’s sitting on more than $537 million in cash.
Stephen Leeb, PhD., The Complete Investor