CONSUMER electronics group Great Wall Electronic International is back on its feet after a tough 1994. Last year was a stormy one for the company with several distasteful incidents happening at the same time, namely: falling production capacity, management malpractice in France and questionable forays into the Chinese property market. The consequences crushed profit margins. Nevertheless, the toughest times seem to have passed and the company is now capable of handling higher sales volumes, has better-equipped manufacturing facilities, and its factory in France is now managed by Hong Kong managers. Brokerage Seapower Securities believes the company has learnt its lesson and will not make the same mistakes again. Small industrial companies face a tough competitive environment in 1995, and some will undoubtedly be wiped out by keen competition. Great Wall has the stamina to outlast the others. The company intends to rely more heavily on the television market, aiming to derive 60 per cent of turnover from television sets. Sales of home audio products such as mini hi-fi systems and portable CD players are expected to grow modestly as new product development has not borne fruit. Overall, the company's profit margins will stay in the range of four per cent to five per cent. Great Wall has wasted some corporate resources in the Chinese property market but has now curtailed investment in this risky area. The most important consequence of this is that it will allow Great Wall to regain its status as an authentic industrial stock. With this in mind, investors should re-examine the company. The share price has undergone a traumatic correction which is unduly excessive. The company is set to revive and further selling seems inappropriate. The brokerage recommends the stock as a long-term buy.
