While the global automotive market remains weak, Tong Yang Industry Co (東陽) saw its shipments for the aftermarket (AM) business grow in the first nine months of this year, implying a strong competitiveness in the sector, Capital Investment Management Corp (群益投顧) said last week.
Tong Yang supplies bumpers, grilles and fenders to global brands through the AM channel or as an original equipment manufacturer (OEM).
Its development of more than 100 modules per year and its persistent launch of products to secure long-term competitiveness have supported growth momentum in the AM business in particular, the consultancy said.
In the first nine month of the year, AM revenue rose 4.87 percent year-on-year to NT$11.66 billion (US$381.12 million), corporate data released earlier this month showed.
“Tong Yang’s shipments of AM parts still grew, due to higher shipments to North America, higher revenues derived from the Middle East and Africa on higher purchasing power, as well as the company’s adjustment of product strategies,” Capital Investment said in a research note on Wednesday.
“AM revenue will continue to grow as the number of vehicles in use continues to rise globally, boosting the demand for auto parts, while there is a persistent trend of AM parts replacing OES [original equipment supplier] parts in North America,” it said.
SinoPac Securities Investment Service Corp (永豐投顧) said it expected Tong Yang to see continued sales growth in the AM business from this quarter to next quarter in light of robust demand in North America and Europe.
“The AM business momentum looks sustainable now that the company’s new product development is finished, which should fuel its gross margin expansion,” SinoPac said in a note on Thursday.
Taiwan’s and China’s lackluster markets hurt the firm’s OEM revenue, which declined 35.03 percent year-on-year to NT$4.11 billion in the first nine months.
However, major brands’ new model launches this quarter ‘should help improve its OEM business momentum in China, SinoPac said.
“The utilization rate of Tong Yang’s OEM production lines is likely to rebound and reinvigorate overall sales and earnings growth, thanks to favorable government policies in China,” it said.
Tong Yang said pretax profit last month fell 14.18 percent year-on-year to NT$121 million due to foreign exchange losses of NT$40.11 million.
Third-quarter pretax profit grew 17.5 percent annually to NT$523 million, with earnings per share (EPS) of NT$0.94, while revenue fell to NT$5.18 billion, down from NT$5.39 billion a year earlier, the company’s data showed.
“The third-quarter pretax income was shy of our expectations owing to non-operating items,” such as foreign exchange losses and a one-off adjustment from a reinvestment business unit, Yuanta Securities Investment Consulting Co (元大投顧) said on Tuesday.
“September’s operating margin of 9.8 percent was better than expected, which in our view is due to management’s better operating expense control,” Yuanta Securities added
Tong Yang reported pretax profit of NT$1.78 billion for the first three quarters, with EPS of NT$3.18, compared with EPS of NT$3 for the same period last year, while cumulative revenue dropped 9.61 percent year-on-year to NT$15.77 billion.