China Wheel – Expecting to Double Sales

China Wheel Holdings, manufacturer of wheel rims for carmakers such as Nissan and Toyota, has stated that it expects revenue to more than double within three years as new production capacity comes on stream and the Chinese passenger car market continues to grow.

The Hebei Province based company, currently China’s fourth-largest aluminium wheel rim producers, is set to become one of the country’s largest manufacturers by 2010 following the opening of a new facility that will almost treble its production capacity. China Wheel currently designs and makes rims for the Chinese operations of Michelin and car manufacturers including Nissan and Toyota.

In January, China Wheel announced it would increase production capacity from 3 million wheels to 8 million in that time, this additional capacity provided through the opening of a new production plant in Tianjin.

“The plant will contribute more than 100 percent of the firm’s expected revenue in 2006,” executive chairman Zang Ligen told Reuters in a telephone interview. It is understood he meant that the plant will more than double the expected revenue. “Based on current estimates of our industry peers’ growth, we would either be the largest, or easily one of the top three,” he added.

According to Singapore based brokerage firm CIMB-GK, the number one manufacturer is Taiwan’s Liufeng Machinery Industry, producing 5 million wheels a year. Number two is China’s Zhejiang Wanfeng, with 4.6 million wheels, and third largest is China’s Dicastel, who makes 3 million wheels annually.

China Wheel plans to invest 780 million yuan (£51.2 million) in the Tianjin plant, which is expected to begin its first phase by the end of this year. With strong demand from both the Chinese car market, now the world’s second largest, and from international companies, its seems likely that the new facility will be earning its keep very quickly. “We can’t keep up with demand,” said Zang. “Based on our customers’ forecasts, their demand will go up by 10-20 per cent every year.” He added that the firm is predicting an order book of 3.5 million wheels for 2007, and that the firm hopes to secure two to three new customers this year, although he declined to name them.

China Wheel, which due to report its full-year results in late February, has a market value of US$94 million and reported a 55.5 per cent rise in revenue for the first nine months of 2006 to 551.4 million yuan (£36.3 million), while net profit increased 18.6 per cent to 56.2 million yuan (£3.69 million).

In 2007, the company is expected to post 961.1 million yuan (£63.1 million) in revenue and 96.9 million yuan (£6.36 million) in net profit, according to brokerage firm UOB Kay Hian. Furthermore, China Wheel shares have jumped by nearly 71 per cent in the past year.