Wonder Auto Technology (WATG) has revealed that one of its subsidiaries, Jinzhou Halla Electrical Equipment Co. has entered a joint development agreement with Shenzhen BYD Auto Co. Under the agreement, Jinzhou Halla will design and develop alternator prototypes for Shenzhen BYD’s sedan products (Model: BYD F3/F3R) with engine size between 1.3L and 1.5L. Jinzhou Halla will commence sample deliveries in Nov. 2009 for testing.

According to China Association of Auto Manufactures, BYD F3/F3R was the top selling single car model for a quarter and for four single months during the first eight months of 2009.

Wonder Auto already supplies starters to Shenzhen BYD under an agreement entered in December last year. This along with the new agreement will help the company to bring at least 100,000 extra unit sales in 2010.

The China-based manufacturer of automotive electrical parts, suspension products and engine accessories enjoys a strong domestic market share in alternators and starters. The company is strategically positioned in the fast-growing sub-segments in these markets. Demand for alternators and starters have grown, driven by the quick rise in the number of cars in use and miles driven.

We recommend the shares of Wonder Auto as Neutral with a target price of $11.00.

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