2009 Was A “Banner Year” for Cheng Shin Rubber

Commenting on Cheng Shin’s recent rapid growth, Morgan Stanley’s Taiwan automotive industry analyst, Jeremy Chen, described the company’s 2009 financial results as “very strong.” In his words the results point to the booming Chinese tyre market and to the relative newcomer’s potential threat to existing tyre giants: “The strength and growth of local tyre makers actually are a growing threat to Michelin (for which Chinese sales are currently circa 5-10 per cent of overall sales). However, in reality there is probably room for everyone to grow in China at present…”

The company’s strong margins also garnered praise from the analysts: “We highlight that Cheng Shin's full year 2009 operating margin (20 per cent) remained well ahead of its peers' (12-15 per cent), providing more evidence of the company's strong competitiveness and execution capability. Although we expect margins and profits to fall this year, due to rising material costs, we retain an overweight rating on Cheng Shin, as we continue to see the stock as one of the best plays on China's booming auto market.”

‘Truly a banner year…’

In conclusion the analysts described 2009 as “truly a banner year.” In addition to the strong margins described above, the company generated net income of NT$13.4 billion, which was reportedly more than its cumulative profits between 2005 and 2008. And furthermore, the company’s Chinese plants are said to have generated NT$10 billion of profits (75 per cent of group net income) in 2009, making it “the most profitable and successful China play among Taiwan companies,” according to Morgan Stanley.

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