Tire manufacturer Kenda Rubber Industrial Co 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.
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 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 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.
Source: Taipei Times
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