SHENZHEN, China, Nov. 8 -- Comtech Group, Inc. (NASDAQ:COGO) , a leading provider of customized design solutions for the technology manufacturing sector based in China, today announced financial results for its third quarter ended September 30, 2007.

The company reported another record quarterly revenue of USD 56.1 million, up 30.0% from revenue of USD 43.2 million reported during the third quarter of 2006. The company also delivered strong growth in each of its three key product categories -- digital media, mobile handsets and telecommunications equipment -- which Comtech believes are among the fastest growing markets in China.

For the third quarter of 2007, Comtech also reported the highest quarterly net income in company history for the ninth time, amounting to USD 5.5 million, up 32.7% from USD 4.1 million during the same period last year. Non-GAAP net income (as described below) was USD 7.1 million, up 47.9% from USD 4.8 million of the same period in 2006. Earnings per share, diluted on a U.S. GAAP basis, was, similar to the third quarter of 2006 at USD 0.14, and non-GAAP EPS Diluted was USD 0.18, up 28.6% from USD 0.14 reported for the third quarter of 2006.

   Key financial indicators:
   (All numbers in USD thousands, except per-share amounts)

                                 Q3 2007   Q3 2006   Percent Change
   Consolidated Revenue          $56,100   $43,165        30.0%
   Cost of Revenue               $45,179   $35,074        28.8%
   Gross Profit                  $10,921   $8,091         35.0%
   Net Operating Expenses        $5,976    $4,483         33.3%
   Income from Operations        $4,945    $3,608         37.1%
   Net Income                    $5,477    $4,127         32.7%
   EPS Diluted                   $0.14     $0.12          16.7%
   Non-GAAP EPS Diluted          $0.18     $0.14          28.6%


  (1) The US dollar amounts are calculated based on the conversion rate of
      USD 1 to RMB 7.4928 as of September 30th, 2007 and USD 1 to RMB 7.9040
      as of September 30th, 2006.
  (2) Non-GAAP net income excludes share-based compensation expenses, and
      acquisition related costs including amortization of purchased
      intangible assets.
  (3) Non-GAAP net income was USD 7.1 million, or USD 0.18 per diluted share
      in Q3 2007, excluding USD 1.4 million for stock-based compensation
      expenses and USD 0.3 million for acquisition related costs consisting
      of amortization of purchased intangible assets.

Recent highlights include:
-- USD$ 10 million new contracts with key Chinese mobile phone manufacturers
-- Expansion into fast growing education technology market
-- Completion of acquisition of display panel solutions provider to enhance share of digital media sector in China

Jeffrey Kang, president and CEO of Comtech, said, "We achieved the highest revenue and the net income in our company history during the last quarter. Our business has continued its strong rate of growth in each of our targeted end markets throughout the third quarter -- namely, digital media, mobile handsets and telecommunications equipment. Our mobile handset business, in particular, has developed above and beyond our previous forecasts, accounting for over 40% of our total revenue. Our business is driven by consumer spending power in China. We believe that the consumer spending power in China will continue to grow at a rapid pace, and it establishes a solid foundation for our end markets, which in turn supports our business growth."

"In addition to growing our existing business, we have been actively expanding into emerging high growth areas. As a part of our mission to capture high growth opportunities, we have also entered into the fast growing education technology market this quarter with a customized module solution for learning devices, while furthering our development in the auto electronics," said Mr. Kang.

"Furthermore, this quarter has seen us complete our first major acquisition following the recent share placement in April. Our acquisition of Keen Awards, a leading engineering design and service company for customized display panels, has already made a positive impact on our digital media business. We have full confidence that the synergy of Keen Awards' engineering expertise and Comtech's extensive customer base will meet market demand successfully for years to come. Indeed, Comtech's achievements, coupled with our recent completion of this deal, demonstrate our continued commitment to delivering sustainable, solid development through strong organic growth and accretive acquisitions," Mr. Kang remarked.

Financial Results
Revenue for the third quarter was USD 56.1 million, an increase of 30.0% compared to the USD 43.2 million reported for the third quarter of 2006. The revenue breakdown is as follows: USD 13.6 million, or 24.3% of total sales, for digital media products, representing a significant year-on-year increase of 37.6%; USD 23.1 million, or 41.2% of total sales, for mobile handsets, representing a year-on-year increase of 40.2%; and, USD 16.5 million, or 29.3% of total sales, for telecommunications equipment, representing a year-on-year increase of 10.2%. The company's engineering services business contributed USD 2.9 million in revenues for the third quarter and accounted for approximately 5.2% of total sales, representing a year-on-year increase of 56.5%.

Cost of revenues, which includes the aggregate purchase of components from suppliers and the direct cost of services, was USD 45.2 million compared to USD 35.1 million, representing a year-on-year increase of 28.8%. Gross profit for the third quarter was USD 10.9 million, up 35.0% compared to USD 8.1 million during the third quarter of last year. The gross margin for the third quarter was 19.5%, increased from 18.7% reported during the third quarter of 2006; it increased slightly from the 19.3% figure reported during the second quarter of 2007.

Selling, general and administrative expenses for the quarter totaled USD 4.6 million, up 30.8%, compared to USD 3.5 million reported for the third quarter of last year and increased 32.2% from the second quarter of 2007. The increase was attributable to an increase in in stock-based compensation expenses and other sales related expenses to support our ongoing growing business. Research and development expenses increased by 39.2% to USD 1.4 million compared to USD 1.0 million in the third quarter of 2006. R&D expenses were mainly related to investment in developing new business.

Income from operations was USD 4.9 million, up 37.1% as compared to USD 3.6 million for the third quarter of 2006. The operating margin for the third quarter was 8.8%, versus 8.4% for the same quarter in 2006. Excluding the effects of stock based compensation and amortization of purchased intangible assets; the operating margin would have been 11.8%. The effective tax rate for the third quarter of 2007 was 8.7%, compared to 7.2% for the same period in 2006. Minority interest's income share was USD 97,000 as compared to a share of income of USD 132,000 over the same period in 2006.

Net income for the third quarter was USD 5.5 million, representing EPS Diluted of USD 0.14 on a U.S. GAAP basis compared to a net income of USD 4.1 million or EPS Diluted of USD 0.12 in the same quarter of 2006. Included in the third quarter 2007 net income were an amount of USD 1.4 million for stock- based compensation expenses and an amount of USD 0.3 million for amortization of purchased intangible assets. Excluding the share-based compensation cost and the amortization of purchased intangible assets, the company would have reported non-GAAP net income of USD 7.1million or USD 0.18 diluted earnings per share for the third quarter of 2007. The weighted average number of shares used in the calculation of diluted EPS was USD 39.5 million compared to USD 33.8 million in the third quarter of 2006, mainly due to shares issued under the recent secondary public offering.

For the nine month period ended September 30, 2007, the company reported revenue of USD 153.4 million, an increase of 28.2%, compared to USD 119.6 million reported during the same period in 2006. Gross profit was USD 29.6 million, an increase of 33.5% compared to USD 22.2 million reported for the same period in 2006. Gross margin was 19.3% of sales, a 3.8% increase from 18.6% for the nine month period ended September 30 2006. Net operating expenses were USD 15.5 million, an increase of 50.3% as compared to USD 10.3 million for the same period in 2006. Income from operations was USD 14.2 million, an increase of 19.0% from USD 11.9 million reported during the same period in 2006. Pro forma operating margins, excluding stock compensation and amortization, were up 8.1% as compared to the same period during 2006 to 12.0%, as a result of higher gross margin. The company had an effective tax rate of 8.6%, slightly up from 8.2% during the same period in 2006. Minority interests decreased by USD 0.6 million as a result of the complete buy-out of the 60% owned subsidiary, Shanghai E&T. Net income for the nine month period ended September 30, 2007 was USD 14.4 million, or USD 0.39 per fully diluted share compared to USD 11.1 million or USD 0.33 per fully diluted share reported for the same period in 2006, up 18.2%. During the nine month ended September 30, 2007, the company incurred USD 3.4 million in non cash stock based compensation, compared to USD 1.4 million during the same period in 2006.

Balance Sheet
Comtech completed the quarter with USD 114.7 million in cash, down from the USD 128.0 million held as of June 30th, 2007, attributable to the recent acquisitions. Additionally, Comtech had bank borrowings of USD 1.0 million, down 64.6% from USD 2.7 million from the previous quarter. It continues to be in a strong financial position with a current ratio of 4.2 to 1. Inventory turnover days has remained stable at 33 days during the third quarter of 2007.

Business Outlook
Management is pleased to announce an upward revision of its 2007 full year guidance to USD 221 million in revenue from an earlier guidance of USD 220 million, and USD 0.70 in non-GAAP EPS Diluted from an earlier guidance of USD 0.69 provided in August 2007.

"Our ability to achieve sustainable growth has been proven by yet another record quarter. Our business growth reflects observed trends, leaving us to predict sustained growth for the future. China's GDP has maintained a rate of growth above 11 percent throughout all three quarters this year(1), and with around half of Chinese consumers intending to increase spending in the next year, along with two thirds planning to increase spending on the consumer electronics sector specifically(2), we anticipate such consumer spending will further support our strong business growth in the remaining 2007 and 2008," said Jeffrey Kang, president and CEO of Comtech Group, Inc.

"Increasing shareholder value has always been the management's top priority. We have increased our annual revenue and EPS guidance yet again due to better visibility of our business through the rest of the year. "

"Certainly, we are proceeding into the biggest quarter of the year and see strong demands for each end market. While our focus remains on further expansion within our traditional markets, we have shown our ability to address new industry opportunities to drive future growth. We believe in Comtech's pioneering products, services and technologies, and our ability to identify, penetrate and capitalize on opportunities in new industries. We believe Comtech will provide significant returns for our shareholders, and look forward to continuous revenue growth and profitability for the rest of 2007 and 2008," said Mr. Kang.

Teleconference Information
Management will conduct a conference call to discuss its financial results for the first quarter at 16:30 EST on Thursday, November 8, 2007. Interested parties may dial toll-free at 1-800-430-2053, if dialing domestically, or 1-973-935-8769 if dialing internationally, and should dial in approximately 15 minutes prior to the start of the call. There will be a playback available until November 15, 2007. To listen to the playback, please call 1-877-519-4471 if calling within the United States or 1-973-341-3080 if calling internationally. Please use the pass code 9333431 for the replay.

This call is being web cast by ViaVid Broadcasting and can be accessed at Comtech's website at http://www.comtech.com.cn/investorinfo.html or ViaVid's website at http://viavid.net/dce.aspx?sid=00004AFE.

To access the web cast, you will need Windows Media Player on your desktop. For the free download of the Media Player please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp.

About Comtech Group, Inc.:
Comtech Group, Inc. (NASDAQ:COGO) is a leading provider of customized module and subsystem design solutions in China. The Company believes it acts as a proxy to China's technology industry as it works with virtually all the major ODMs and OEMs in China. Comtech leverages these relationships and combines their IP to create designs that Comtech then sells to electronic manufacturers. These designs allow manufacturers to reduce their time to market for new products and ultimately increase sales. Comtech Group focuses on the digital media, mobile handset and telecommunications equipment end- markets for its customized design modules while also offering business and engineering services to its large telecom equipment vendor customers. Over the last eleven years, Comtech has grown its customer list to include more than 200 of the largest and most well known manufacturers across the mobile handset, telecom equipment and consumer markets in China, covering both multinational Chinese subsidiaries and Chinese domestic companies.

For further information contact:
Comtech Investor Relations
www.comtech.com.cn/investorinfo.html
communications@comtech.com.cn
H.K.: +852 2730 1518
U.S.: +1 (646) 291 8998
Fax: +86 (755) 2674 3522

About Non-GAAP Financial Measures:
To supplement Comtech's consolidated financial results presented in accordance with GAAP, Comtech uses the following measures defined as non- GAAP financial measures by the SEC: 1) non-GAAP net income, which is net income excluding share-based compensation expenses and acquisition related costs such as amortization of purchased intangible assets, 2) non-GAAP basic and diluted earnings per share, which is basic and diluted earnings per share excluding share-based compensation expenses and acquisition related costs such as amortization of purchased intangible assets, 3) non-GAAP income from operation, which is income from operation excluding share-based compensation expenses and acquisition related costs such as amortization of purchased intangible assets and 4) non-GAAP operating margin, which is operating margin excluding share-based compensation expenses and acquisition related costs such as amortization of purchased intangible assets. The presentation of these non- GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

Comtech believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses and acquisition related costs such as amortization of purchased intangible assets that may not be indicative of its operating performance from a cash perspective. Comtech believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Comtech's historical performance and liquidity. Comtech computes its non-GAAP financial measures using the same consistent method from quarter to quarter. Comtech believes these non- GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP net income, non-GAAP basic and diluted earnings per share , non-GAAP income from operation and non-GAAP operating margin is that these non-GAAP measures exclude share-based compensation charges and acquisition related costs such as amortization of purchased intangible assets that have been and will continue to be for the foreseeable future a recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

(1) Dow Jones MarketWatch, October 25, 2007.
(2) The Boston Consulting Group, Hubert Hsu, et al., "Winning China's Consumers", September 2007. 47 percent of Chinese consumers intend to trade up to better products, compared with 29 percent in the United States and 23 percent in Western Europe. A higher percentage of Chinese consumers intend to "trade up" in the consumer electronics sector than any other, with 67 percent planning to trade up. The second highest sector is home appliances with 61 percent of consumers intending to trade up to better products in the coming year.

  Tables Attached

  COMTECH GROUP, INC.
  UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
  AS OF SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
  (in thousands, except shares and per share amounts)


                                    Sep 30, 2007  Sep 30, 2007  Dec 31, 2006
                                       $'000         RMB'000       RMB'000

  Assets
  Current assets:
  Cash                                 114,669       859,192       375,147
  Pledged bank deposits                  7,231        54,182        55,416
  Accounts receivable, net of
  allowance of doubtful accounts        61,799       463,051       278,589
  Bills receivable                       2,704        20,257        31,797
  Prepaid expenses and other
  receivables                            2,975        22,288        14,254
  Inventories                           15,394       115,344        71,959
  Total current assets                 204,772     1,534,314       827,162

  Property and equipment, net            2,361        17,690        12,395
  Intangible assets, net                15,274       114,444        19,528
  Investment in an affiliated
  company                                   55           416           416
  Goodwill                              14,975       112,208        46,692
  Other assets                             121           905           905
  Total Assets                         237,558     1,779,977       907,098

  Liabilities and stockholders'
  equity
  Current liabilities:
  Trade accounts payable                22,536       168,860       114,217
  Bank borrowings                          958         7,180        30,272
  Amount due to related parties            198         1,483         1,522
  Income taxes payable                   1,485        11,125         9,270
  Accrued expenses and other
  liabilities                           23,290       174,505        86,253
  Total current liabilities             48,467       363,153       241,534

  Minority interests                         -             -         1,646

  Stockholders' equity
  Common stock                             419         3,139         2,725
  Additional paid-in capital           143,130     1,072,446       402,721
  Retained earnings                     51,267       384,134       275,890
  Accumulated other
  comprehensive loss                    (5,725)      (42,895)      (17,418)
  Total stockholders' equity           189,091     1,416,824       663,918

  Total liabilities and
  stockholders' equity                 237,558     1,777,977       907,098


  COMTECH GROUP, INC.
  UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
  FOR THE QUARTERS ENDING SEPTEMBER 30, 2007 AND 2006
  (in thousands, except shares and per share amounts)


                               Three Months  Three Months   Three Months
                                  Ended         Ended          Ended
                               Sep 30, 2007  Sep 30, 2007   Sep 30, 2006
                                  $'000        RMB'000         RMB'000
  Net sales
      Product revenue            53,160         398,319        326,336
      Service revenue             2,940          22,029         14,843
                                 56,100         420,348        341,179
  Cost of sales
      Cost of goods sold        (43,122)       (323,106)      (266,317)
      Cost of services           (2,057)        (15,409)       (10,908)
                                (45,179)       (338,515)      (277,225)

  Gross profit                   10,921          81,833         63,954
  Selling, general and
  administrative expenses        (4,551)        (34,101)       (27,496)
  Research and development
  expenses                       (1,432)        (10,732)        (8,135)
  Other net operating
  income                              7              52            203
  Income from operations          4,945          37,052         28,526
  Other non-operating
  income                              -               -          7,285
  Interest expense                  (47)           (352)          (850)
  Interest income                 1,207           9,042          1,337
  Income before income tax        6,105          45,742         36,298
  Income tax                       (531)         (3,977)        (2,628)
  Income before minority
  interests                       5,574          41,765         33,670
  Minority interests                (97)           (727)        (1,046)
  Net income                      5,477          41,038         32,624

  Earnings per share         $                   RMB            RMB
  - Basic                          0.14            1.07           1.01
  - Diluted                        0.14            1.04           0.97

  Weighted average number of shares outstanding
  - Basic                    38,348,566      38,348,566     32,393,508
  - Diluted                  39,541,644      39,541,644     33,751,117



  COMTECH GROUP, INC.
  RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES
  FOR THE QUARTERS ENDING SEPTEMBER 30, 2007 AND 2006
  (in thousands, except shares and per share amounts)


                                Three Months  Three Months   Three Months
                                   Ended         Ended        Ended
                                Sep 30, 2007  Sep 30, 2007  Sep 30, 2006
                                  $'000        RMB'000         RMB'000
  Net Income
      GAAP net income             5,477        41,038           32,624
      Share-based compensation
       expense                    1,351        10,120            5,468
      Acquisition related costs
       - amortization of
       purchased intangible
       assets                       300        2,249                 -
      Non-GAAP net income         7,128       53,407            38,092

  Earnings per share             $            RMB               RMB
      GAAP net income per
       share- Basic                0.14         1.07              1.01
      GAAP net income per
       share- Diluted              0.14         1.04              0.97

      Non-GAAP net income per
       share- Basic                0.19         1.39              1.18
      Non-GAAP net income per
       share- Diluted              0.18         1.35              1.13


  Weighted average number of
  shares outstanding
      - Basic                38,348,566   38,348,566        32,393,508
      - Diluted              39,541,644   39,541,644        33,751,117

  Income from operation
      GAAP income from
       operations                 4,945       37,052            28,526
      Share-based
       compensation expense       1,351       10,120             5,468
      Acquisition related
       costs - amortization
       of purchased
       intangible assets            300        2,249                 -
      Non-GAAP income from
       operation                  6,596       49,421            33,994

  Operating Margin
      GAAP operating margin         8.8 %        8.8 %             8.4 %
      Non-GAAP operating
       margin                      11.8 %       11.8 %            10.0 %