China Wheel Holdings, which makes wheel rims for auto firms such as Nissan and Toyota, said on Friday that it expects revenue to more than double by 2010 as new capacity comes on stream and more Chinese buy cars.
Hebei-based China Wheel is set to become one of China's largest manufacturers of aluminium wheel rims by 2010 with the opening of a new plant that will almost treble its production capacity.
The firm currently designs and makes rims for French tyre giant Michelin and car manufacturers such as Japan's Nissan Motor Co and Toyota Motor Corp in China, where total car sales grew 25 percent last year.
In January, China Wheel, the country's fourth-largest wheel rim producer, said it would increase production capacity from 3 million wheels to 8 million by 2010 with 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 on Friday.
"Based on current estimates of our industry peers' growth, we would either be the largest, or easily one of the top three."
Taiwan's Liufeng Machinery Industry produces 5 million wheels a year, China's Zhejiang Wanfeng makes 4.6 million wheels, and China's unlisted Dicastel makes 3 million wheels annually, according to Singapore brokerage CIMB-GK. But China Wheel's expansion plans should allow the firm to overtake all three companies.
The firm plans to invest 780 million yuan in the Tianjin plant, which is expected to begin its first phase by the end of this year.
Buoyant car demand: China Wheel is seeing strong demand from auto firms in China, the world's second-largest auto market after the US, as well as from companies outside China. Many of these firms are choosing car parts made in China because they are cheaper than those made by European and American rivals, Zang said.
"We can't keep up with demand. Based on our customers' forecasts, their demand will go up by 10-20 percent every year," he said, adding that the firm is predicting an order book of 3.5 million wheels for 2007.
Zang said that China Wheel is constantly marketing its wheels to new customers, both at home and in countries including Japan, the United States, Germany and Russia.
He also said that the firm hopes to secure two to three new customers this year, but declined to name them.
China Wheel is due to report its full-year results later this month. The firm, which has a market value of US$94 million, reported a 55.5 percent rise in revenue for the first nine months of 2006 to 551.4 million yuan ($71.07 million) while net profit grew 18.6 percent to 56.2 million yuan.
UOB Kay Hian forecast a 34.6 percent increase in net profit to 79.4 million yuan in 2006 and a 51.3 percent rise in revenue to 745.6 million yuan. Zang declined to comment on 2006 net profit citing Singapore Exchange rules.
In 2007, the firm is expected to post 961.1 million yuan in revenue and 96.9 million yuan in net profit, according to UOB Kay Hian. When asked whether the brokerage forecasts were accurate, Zang said: "This is a fair statement."
Shares of China Wheel have soared nearly 71 percent in the past year. China Wheel trades at about 9.9 times historical earnings, compared with an average of 11.5 times for the Singapore MSCI Industrial Components Index of companies, Reuters data showed.