Analysts: Cheng Shin reports ‘robust March sales’

In response to Cheng Shin Rubber (CSR) reporting March consolidated revenue of NT$11.2 billion, up 23 per cent year-on-year and 57 per cent month-on-month, financial analysts have described the figures as “well ahead of the previous high of NT$9.5 billion (Aug 2010).” The company is also said to be gained share in the Chinese domestic market.

Writing in an investor’s note, Morgan Stanley’s market watchers commented: “We attribute the big jump in revenue to successful average selling price hikes, which we believe were raised by 8-12 per cent. In addition, the labour issues at the Thailand plant appear to be improving as revenue rebounded to over NT$1 billion. We also believe CSR is gaining market share, as many of the smaller tyre companies in China have reportedly cut production as they are unable to cope with the high raw material prices.”

According to the analysts, CSR claims that all its plants are still running at near full capacity, as demand has remained robust in both China and overseas markets: “We expect the next leap in sales to come at the end of the third quarter of 2011, when CSR’s new Chongqing and Xiamen plants are slated to begin production.”

While investors continue to debate how raw material costs will impact CSR’s profitability, Morgan Stanley wrote that this is to overlook the bigger picture: “Our thesis is simple; already the largest auto producing country, China will likely have the largest vehicle population in years to come. In our view, CSR, as the only greater China tyre company in the global top ten ranking, has the scale, products, and branding to ride on this auto boom. Our confidence in CSR is also supported by the excellent management execution track record.

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