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
MediaTek Inc (聯發科), the world’s biggest 5G chip supplier, saw its ranking rise by one notch to No. 7 last year among world semiconductor vendors, as it benefited from the rapid 5G smartphone uptake in China after Huawei Technologies Co (華為) was forced to exit the market, Gartner Inc said in a report yesterday. MediaTek’s revenue soared 58.8 percent to US$17.45 billion last year from US$10.99 billion in 2020, outpacing the global semiconductor industry’s growth of 25 percent, according to Gartner’s tally. That gave MediaTek a 3 percent market share. The Hsinchu-based chip company ranked No. 8 in 2020, behind Texas Instruments
Medigen Vaccine Biologics Corp (高端疫苗) yesterday reported higher neutralizing antibody levels in people who were given its COVID-19 vaccine as a booster after two AstraZeneca doses, the company said. In a trial of 200 participants who received Medigen’s COVID-19 vaccine, neutralizing antibodies against the Omicron variant of SARS-CoV-2 grew by 5.7 times one month after being administered, Taoyuan General Hospital said. Medigen said that the results have been submitted to medRxiv, an online platform for researchers to share complete but unpublished papers. Another trial conducted by National Taiwan University Hospital showed that among 45 participants who received three doses of the Medigen vaccine,
BEATING EXPECTATIONS: With electric vehicles and the metaverse on the horizon, the company predicts a solid first quarter as customers stockpile inventories Key iPhone assembler Hon Hai Precision Industry Co (鴻海精密) could achieve an “unprecedented” performance in the first quarter, chairman Young Liu (劉揚偉) said. “Our performance in the first quarter might surpass how we fared in the past few years, and it is likely that some staff at key sites might only get two days off during the Lunar New Year holiday,” Liu said in prepared remarks for the company’s annual workers’ party yesterday. Manufacturers around the world are racing to build up inventory out of fear that outbreaks of the Omicron variant of SARS-CoV-2 and other uncertainties could further disrupt their supply
Jardine Matheson Holdings Ltd (怡和洋行), a diversified Asia-based group whose businesses span property, transport, retail and luxury hotels, is considering strategic options for its restaurant unit, people with knowledge of the matter said. The Singapore-traded conglomerate is weighing a sale of Jardine Restaurant Group (怡和餐飲集團), a wholly owned subsidiary that operates KFC and Pizza Hut franchises in Taiwan, Hong Kong, Macau and Vietnam, said the people, who asked not to be identified as the information is private. The subsidiary also runs Pizza Hut restaurants in Myanmar, according to its Web site. Jardine Matheson has held preliminary discussions with advisers, the people said, adding