Gushan Environmental Energy (GU) -- Strong Buy: Building upon our recent success in China-based stocks, I am announcing an immediate “Strong-Buy” rating on Gushan Environmental Energy (GU) at the current $1.30 per share range. Gushan Environmental appears poised to capitalize on China’s robust economy and the country’s imminent shift toward “green” technologies -- I am projecting a major near-term bounce in the GU share-price, which is currently just above a 52-week low of $1.23 per share. As you will recall, our most recent Chinese-based stock, which also produces a green technology, is Jinpan International (JST) – which we recommended in mid-September of last year at $27.50 and has since set a new 52-week high of $52.88 on 6 January.  

Gushan Environmental is a leading Chinese producer of “biodiesel” – a renewable, clean burning fuel made from vegetable oils, animal fats, and waste oil. Biodiesel is considered a viable alternative fuel to conventional petroleum-based diesel as it renewable, nontoxic, readily biodegradable, and emits about 50% less carbon dioxide than petroleum-based diesel. Gushan sells its biodiesel directly to users, such as marine vessel operators, as well as to petroleum wholesalers and individual retail gas stations. The company currently has 7 production facilities with a combined annual production capacity of 450,000 tons.

Although Gushan Environmental is coming off an arduous third quarter hampered by a complex consumption tax issue currently in the hands of the Chinese government – the company has been able to maintain a relatively strong cash position of around US$86 million, which should enable GU to withstand this current period of volatility and uncertainty. Gushan Environmental has also done a good job of late diversifying its raw material sources, and the long-term outlook for China’s biodiesel market appears strong. In addition to a projected near-term bounce in its share-price, Gushan could eventually trade back above the $18 per share level as the company capitalizes on China’s medium and long-term development plans for clean energy sources such as biodiesel.  

Gushan Environmental Energy (GU) is a “Strong Buy” at the current $1.30 per share range.

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