Monday, August 27, 2007

Ceradyne (NASDAQ:CRDN): MRAP II orders could represent huge upside

- First Albany notes several news articles last week cited U.S. military and Pentagon officials regarding the military's inability to meet its target shipment of mine resistant ambush protected
(MRAP) vehicles in Iraq and Afghanistan for CY07. They believe this situation presents an opportunity for additional players.

According to the firm Ceradyne (NASDAQ:CRDN) has already announced its partnership with Oshkosh Truck and Ideal Innovations (I-3) to develop the armored vehicle BULL. This vehicle has successfully passed limited testing by the U.S. Government and, they believe, is a serious contender for future MRAP II orders and could represent huge upside for CRDN.

While the firm sees significant opportunities with the Army in its MRAP II applications, these are not in their estimates yet. They would point out that just the incremental revenue growth opportunity from China and recent acquisitions could be meaningful in CY08. At current levels, the stock trades at less than 14x conservative CY08 estimates. Firm believes any traction on the BULL could present significant upside to the stock. Reiterates Buy rating.

Notablecalls: I suspect this call is going to generate some interest in CRDN.

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