Tire manufacturer Kenda Rubber Industrial Co (建大輪胎) is likely to see sales growth accelerate this year, thanks to China’s booming auto market, analysts said.
The strong tire replacement demand in China and Kenda’s increasing presence in both after-market tires and spare tires will also help the company maintain stable profit margins this year, they said.
“Although the growth rate for China’s new car market has moderated from the high teens in previous years to 7.1 percent last year, the market for used cars grew at a robust 11 percent year-on-year last year to reach 4.8 million units and is expected to double to 10 million units over the next three years,” Primasia Securities Co analyst Kai Chen said in a report on Thursday.
Chen said Kenda could use its manufacturing expertise to profit from this industry trend.
Total car sales in China rose 4.33 percent to 19.31 million units last year on an annual basis, a Chinese industry group said in January. Sales for this year are forecast to increase 7 percent to 20.65 million units, according to the China Association of Automobile Manufacturers.
While spare tires generate a lower profit margin, “Kenda has successfully used the spare tires market as a stepping stone to obtain orders from auto original equipment manufacturers for higher-margin new tires,” Chen said.
The company could therefore seek contracts with more major brands in China, such as Volkswagen, he added.
Kenda, Taiwan’s second-largest tiremaker and the 27th-biggest in the world, reported NT$30.19 billion (US$1.02 billion) in consolidated revenue last year, up 8.63 percent from 2011, Kenda chairman Yang Ying-ming (楊銀明) told reporters in January.
Net income was NT$1.78 billion in the first three quarters of last year, or earnings per share (EPS) of NT$2.43, compared with NT$2.69 billion, or EPS of NT$3.67, for the same period of 2011, the company’s financial statement showed.
Kenda held an analysts’ conference on Wednesday, revealing net income from its core operations grew 40 percent last year with EPS of NT$3.5, with gross margin improving from 15.9 percent in 2011 to 20.5 percent through the third quarter of last year, Chen said in the report.
The company is expected to release its annual consolidated results for last year later this month.
Kenda mainly produces bicycle and motorcycle tires, but has expanded into car tires in recent years to meet rising demand from China.
It has six plants in Taiwan, China and Vietnam, with China and the US accounting for more than 50 percent of its annual revenue.
The company plans to enhance its capacity across the Taiwan Strait by increasing daily production by 24,000 tires by the end of this year, which would boost annual revenue to NT$50 billion within the next five years, Yang said on Jan. 18.
Like its bigger local rival, Cheng Shin Rubber Industry Co (正新), Kenda saw improved margins last year, thanks to a fall in rubber prices.
Because rubber prices are forecast to remain low and tire demand is slated to increase by 13 percent in China this year, Kenda could see its earnings increase to NT$4.01 per share this year from EPS of NT$3.52 last year, SinoPac Securities Investment Service Corp (永豐投顧) said last week.
“Compared with foreign tiremakers, which generally have less than a 10 percent exposure to the Chinese market, Taiwanese firms make a higher proportion of their sales in China, with about 60 percent for Cheng Shin and 40 percent for Kenda. Therefore, Taiwanese tiremakers will benefit more than their global peers from the boom in China’s tire market,” SinoPac said in a note on Thursday.
However, Yuanta Investment Consulting Co (元大投顧) analyst Leslie Kuo (郭建華) was cautious about the global tire market this year, especially after French tiremaker Michelin and Goodyear Tire & Rubber Co of the US both offered downbeat outlooks, given still-sluggish car demand in Europe.
In addition, there is still uncertainty in China’s replacement tire market, while rubber price declines have narrowed recently and tire prices are falling amid increasing supply, Kuo said in a report on Feb. 27, forecasting Kenda’s margin would trend downward this year.
Yuanta forecast Kenda’s revenue for this year would either remain flat from last year or fall slightly to NT$29.47 billion, with earnings of NT$3.02 billion, or NT$4.1 per share.
Kenda’s share price rose 0.81 percent to close at NT$50 on Friday. Over the past 12 months, its stock has soared 44.51 percent, while the benchmark TAIEX edged up just 0.38 percent.
Additional reporting by Camaron Kao
DAMAGE REPORT: Global central banks are assessing war-driven inflation risks as the law of unintended consequences careens around the world, spiking oil prices Central banks from Washington to London and from Jakarta to Taipei are about to make their first assessments of economic damage after more than two weeks of conflict between the US and Iran. Decisions this week encompassing every member of the G7 and eight of the world’s 10 most-traded currency jurisdictions are likely to confirm to investors that the specter of a new inflation shock is already worrying enough to prompt heightened caution. The US Federal Reserve is widely expected to do exactly what everyone anticipated weeks ahead of its March 17-18 policy gathering: hold rates steady. The narrative surrounding that
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) share of the global foundry market rose to almost 70 percent last year amid booming demand for artificial intelligence (AI), market information advisory firm TrendForce Corp (集邦科技) said on Thursday. The contract chipmaker posted US$122.54 billion in revenue, up 36.1 percent from a year earlier, accounting for 69.9 percent of the global market, TrendForce said. Its share was up from 64.4 percent in 2024, it said. TSMC’s closest rival, Samsung Electronics, was a distant second, posting US$12.63 billion in sales, down 3.9 percent from a year earlier, for a 7.2 percent share of the global market. In the
HEADWINDS: The company said it expects its computer business, as well as consumer electronics and communications segments to see revenue declines due to seasonality Pegatron Corp (和碩) yesterday said it aims to grow its artificial intelligence (AI) server revenue more than 10-fold this year from last year, driven by orders from neocloud solutions clients and large cloud service providers. The electronics manufacturing service provider said AI server revenue growth would be driven primarily by the Nvidia Corp GB300 server platform. Server shipments are expected to increase each quarter this year, with the second half likely to outperform the first half, it said. The AI server market is expected to broaden this year as more inference applications emerge, which would drive demand for system-on-chip, application-specific integrated circuits
At a massive shipyard in North Vancouver, Canadian workers grind metal beams for a powerful new icebreaker crucial to cementing the country’s presence in the increasingly contested arctic. Icebreakers are specialized, expensive vessels able to navigate in the frozen far north. And “this is the crown jewel,” said Eddie Schehr, vice president of production at the Seaspan shipyard. For Canadian Prime Minister Mark Carney, who heads to Norway next Friday to observe arctic defense drills involving troops from 14 NATO states, Canada’s extreme north has emerged as a strategic priority. “Canada is and forever will be an Arctic nation,” he said ahead of
RSS