By George I Think They've Got It!

In the November 2015 edition of the Insider Magazine, we commented that Hollysys appeared to be on the right track to succeed in the current hailstorm that is today’s economy. Here is what we wrote:
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Hollysys is, however a diversified player with a strong survival instinct. They are changing their focus, at least temporarily, away from mechanical and electrical solutions and more toward rail transport, which is a lucrative market for them.
The Industrial Automation segment, which makes up 40% of Hollysys’ revenue base, is highlighted for changes as well. In the quarterly report published November 12, [2015] the company relays the following information concerning its industrial automation segment:
In industrial automation business, during this quarter, we continuously insisted in executing our strategies to maintain the gross margin by penetrating the high-end industrial automation market and providing more highly customized solutions such as power, chemical, food & beverage, pharmaceutical and environmental protection related industries, while offering diversified value software packages to the end users for saving the cost and improving their efficiency.
Although Hollysys Automation shares have decreased 15% since the beginning of the year, they expect their full year revenue range to hit between $565 and $600 million. With targeted markets that steer safely away from the oil and gas industry, they might just make it.
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And they did. In their Q2 2016 Earnings Call Transcript released today, it is apparent that Hollysys is sticking with the plan they put in place last year, and the plan is paying off. Here is the result of their strategy:
Comparing to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31, 2015 increased from $130.3 million to $152.8 million, representing an increase of 17.3%. Broken down by the revenue types, integrated contracts revenue increased by 12.7% to $134.2 million, product sales revenue increased by 49.4% to $15.4 million, and services revenue increased by 229.3% to $3.2 million.
By changing their offering portfolio and refocusing on industries that are not so heavily influenced by oil and gas, Hollysys is recovering its ‘pre-oil bust’ health. There’s a lesson to be learned here for those savvy enough to learn it. Congratulations Hollysys on your flexibility, your success, and your latest financial report!