Tue, Jun 19, 2012 - Page 13 News List

Analysts expect double-digit growth at Cheng Shin

By Kevin Chen  /  Staff reporter

Tire maker Cheng Shin Rubber Industry Co (正新橡膠) could see annual sales increase by between 13 and 17 percent this year and net profit expand by more than 50 percent because of steady demand in emerging markets such as China and India, analysts said yesterday.

With the company entering its peak season in the third quarter and China continuing to offer subsidies for energy-efficient cars in the second half, Cheng Shin will see its growth momentum strenghten, IBTS Investment Consulting Co (台灣工銀投顧) analyst Mandy Lin (林秋香) said in a note.

CLSA Asia-Pacific Markets agreed, saying Cheng Shin would also benefit from China’s tire replacement demand given the company’s growing market position and the strong image of its brands —“Cheng Shin” and “Maxxis,” the brokerage said in a report.

The tire maker has factories in Taiwan, China, Vietnam and Thailand. The company has been expanding capacity this year to meet growing demand: Its Taiwanese plant in Douliou (斗六), Yunlin County, and Chinese plant in Chongqing, Sichuan Province, started production in January; two other Chinese factories — in Zhangzhou and Xiamen, Fujian Province — began operating in April and this month respectively.

Last year, Cheng Shin posted a net profit of NT$8.59 billion (US$287.4 million), down 17 percent year-on-year, or earnings per share of NT$3.45. Its revenue rose 19.99 percent from a year earlier to NT$119.96 billion.

IBTS Investment forecast Cheng Shin would this year post a net profit of NT$14.32 billion, or earnings per share (EPS) of NT$5.75, on NT$136.63 billion in revenue, while CLSA expected the company to make a net income of NT$12.78 billion, or EPS of NT$5.2, on NT$140 billion in consolidated sales.

The two research houses’ forecasts came after the Yuanlin (員林), Changhua County-based company told shareholders on Friday last week that it was optimistic about the outlook in the second half and was considering setting up a production base in India, despite ongoing global uncertainty created by Europe’s debt problem.

Shares of Cheng Shin jumped 3.29 percent to NT$75.30 in Taipei trading yesterday, rising 14.96 percent so far this year.

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