Wonder Auto Technology Reports Fourth Quarter Full Year Fiscal 2006 Results, Provides Outlook

Wonder Auto Technology Reports Fourth Quarter Full Year Fiscal 2006 Results, Provides Outlook

Fiscal 2006 Revenues Increased 50% to $72.2 Million

Wonder Auto Technology, Inc., (OTC Bulletin Board: WATG – News; ”Wonder Auto” or ”the Company”), a China-based manufacturer of automotive electrical parts specifically, starters and alternators, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2006 (”FY06”).

Fiscal 2006 Highlights
— Full Year 2006 revenue increased 50% to $72.2 million
— Full Year 2006 net income increased 29% to $8.2 million

Revenue for the fourth quarter 2006 increased to $19.1 million or 84.4% from revenue of $10.4 million in the fourth quarter 2005. The increase in revenue during the quarter is mainly due to increasing orders from current customers. Gross profit for the quarter was a record $3.9 million, up 50.3% from gross profit of $2.6 million in the comparable quarter a year earlier. Net income increased to $2.5 million or 85.8% for the fourth quarter 2006 from net income of $1.3 million in the fourth quarter 2005. Fully diluted earnings per share for the quarter were $0.10.

For the fiscal year 2006, Wonder Auto’s revenues were $72.2 million, up 50.1% from revenues of $48.1 million for fiscal year ended 2005. Net income for the year was $8.2 million, or $0.40 per fully diluted share.

”We are pleased with the results for 2006 and our ability to achieve our targeted financial goals. We also made significant advances during the year, expanding market share, increasing our production capacity, and adding both new domestic and international customers. We expect to benefit from the both the strong demand for new automobiles in China and the increasing number of vehicles on China’s roads and by making further inroads in the international marketplace. This view, together with an increasing domestic market share leads us to an expectation of a 55% increase in net profit for 2007,” commented Wonder Autos’s Chairman and CEO, Qingjie Zhao.

Fourth Quarter 2006

Revenue for fourth quarter 2006, was $19.1 million for a year-over-year increase of 84.4% from revenue in the fourth quarter 2005 of $10.4 million. Gross profit for the quarter was $3.9 million up 50.3% from gross profit of $2.6 million in the comparable period a year earlier. Gross margin was 20.5% in the quarter, as compared to 25.1% for the fourth quarter 2005.

Administrative expenses increased for the quarter to $0.5 million from $0.3 million in the fourth quarter 2005. The increase in administrative expenses is largely due to the increased cost of being a U.S. publicly traded company. Selling expense decreased to $240,000 for the fourth quarter 2006 from $560,000 in the fourth quarter 2005. Selling expenses were positively impacted by a decrease in warranty expense. Warranty expense as a percent of sales declined from 2% to 1.5% compared to the same quarter last year. The decline in warranty expense reflects improvement in the Company’s quality control processes resulting in lower warranty claims experience.

Operating income increased to $2.9 million in the fourth quarter, up 71.1% from operating income the fourth quarter 2005 of $1.7 million. The increase in operating income is attributed to increase in revenues and gross profits and the decrease in operating expenses as a percent of revenues from 8.6% in the fourth quarter 2005 to 5.4% in the fourth quarter 2006.

Net income for the fourth quarter was $2.5 million, up 85.8% from net income in the same period a year ago of $1.3 million. Fully diluted earnings per share were $0.10

Fiscal 2006 Financial Results

Revenues for the FY06 increased to $72.2 million or 50.1% from revenues in FY05 of $48.1 million. Wonder Auto had two customers who represented more than 10% of total sales. Sales to Beijing Hyundai Motor Company increased by 96% over FY05, and represented 19% of FY06 sales. Sales to Shenyang Aerospace Mitsubishi Motors increased by132% in FY06, and represented 18% of Wonder’s FY06 sales. The Company expects that as it increases its sales in international markets, that the percentage of total revenue contribution from these larger customers will decrease. Gross profit for FY06 was $13.9 million, or 19.2% of revenues, compared to gross profit of $11.3 million or 23.5% of revenues in FY05. Wonder Auto expects to improve gross margin through continued improvement in pricing, material costs and increasing production volume.

Operating income for FY06 was $10.0 million, up 25% over operating income in FY05 of $8.0 million. Operating margin was 13.8% of revenues for the fiscal year ended 2006 compared to 16.6% for the fiscal year ended 2005. Net income was $8.2 million, up 28.5% from $6.4 million in the previous year. Fully diluted earnings per share were $0.40 in FY06

Financial Condition

At December 31, 2006, Wonder Auto had $13.0 million in cash, cash equivalents and restricted cash. Working capital was $18.9 million, reflecting a current ratio of 1.5. Days sales outstanding (DSO) were 122 days for the fourth quarter FY06, up from 116 days in the third quarter of FY06. Net cash provided by operating activities was $1.4 million during the year. Total debt, including short term bank loans and bills payable, stood at $37.2 million. Stockholders’ equity totaled $38.2 million at the end of FY06 compared to $18.9 million at the end of FY05.

Subsequent Event

On August 23, 2006, Wonder Auto acquired a 50% interest in Dong Woo, one of the Company’s material suppliers. On November 18, 2006, Dong Woo amended its Memorandum and Articles of Association such that Wonder Auto obtained control over Dong Woo. As a result, Wonder Auto began consolidating the results of Dong Woo’s operations and its financial position as of December 1, 2006.

Business Outlook

Wonder Auto has added a number of new customers in both the domestic and international markets that are expected to contribute to revenue growth in 2007. The Company is in the process of completing a new starter line and a new alternator line which are scheduled to begin production by June 2007. The combination of increased market penetration, continued improvement in cost control and favorable business environment supports the Company’s expectation for revenue to be approximately $100 million and net income to be approximately $12.8 million in fiscal year-end 2007.

”We have developed a clear and concise strategy with the goal to take Wonder Auto’s position as the second largest Chinese manufacturer of starters and alternators to the number one position by 2008. We have built a strong reputation in the automotive industry for delivering high quality products at an efficient cost. That has allowed us to aggressively increase our market share in China. Our research and development program provides invaluable support for our joint venture programs with automobile manufacturers and contributes to reduced operating costs. We are continuing to expand our production capacity, adding a new starter line and alternator line this year. As we continue increasing our domestic presence we are also expanding internationally all of which support our target to grow faster than the overall China automotive parts industry,” Mr. Zhao concluded.

Conference Call

Wonder Auto will host a conference call on Tuesday, February 13th at 9:00 am ET to discuss results for the fourth quarter and fiscal 2006. Joining Mr. Qingjie Zhao, Chairman, will be Ryan Yuan, CFO, and Jim Groh, Vice President of Strategic Planning of Wonder Auto. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time (888-481-7939). International callers should dial (617-847-8707). Callers from China should dial10 800130 0399. When prompted by the operator, mention Conference Passcode 67857622.

If you are unable to participate in the call at this time, a replay will be available on Thursday, February 13th at 10:00 a.m. Eastern Time, through Thursday, February 20th, 2007. To access the replay dial (888-286-8010) and enter the conference passcode 61087560. International callers should dial 10 800 130 0399 and enter the same passcode.

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.wonderautotech.com . Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.

About Wonder Auto

Wonder Auto, through its subsidiary, Jinzhou Halla Electrical Equipment Co., Ltd., designs, develops, manufactures and sells automotive electrical parts and is the second largest seller of automotive alternators and starters in China. The Company’s products are suitable for various types of automobiles and industrial vehicles. Wonder Auto’s customers include Beijing Hyundai, Shenyang Aerospace Mitsubishi, Harbin Dong’an Mitsubishi, and Dongfeng Yueda Kia Motor Co., Ltd. Wonder Auto is a Nevada corporation with its manufacturing subsidiary Halla and its corporate headquarters located in Jinzhou City, Liaoning, China.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Wonder Auto’s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Wonder Auto is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of auto components; timing approval and market acceptance of new product introduction; general economic conditions; geopolitical events and regulatory changes, as well as other relevant risks not included herein. The information set forth herein should be read in light of such risks. Wonder Auto does not assume any obligation to update the information contained in this press release.