 2014-02-21 |
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(Xian Tan Magazine, Issue 1765)
After vertical integration, YC Group has established its direction and become the second-largest tape company in the world. Among them, ACHEM achieved a historic second-high revenue in January, while Xinzhou set a new record in the packaging materials channel business.
Just as each pitcher in baseball has a clear role, allowing players to understand their positions and prepare accordingly, the same applies in business. Clear internal roles within a group facilitate industrial division. YC Group acquired the management rights of Asia Chemicals (now ACHEM, 1715) in 2009 and acquired Tianchi (now Xinzhou, 3171) in 2011, vertically integrating into a complete packaging materials giant.
YC and ACHEM produce various types of adhesive tapes, plastic sheets, and finished products. After YC took over, the products, channels, and markets of YC and ACHEM became complementary. The group plans to assign upstream and downstream tape-related responsibilities to ACHEM, which is currently expanding production. YC, on the other hand, focuses on holding, construction, and OPP films. Additionally, YC sold its packaging materials division to its logistics and channel subsidiary, Xinzhou, last year.
From the January revenue performance, the most notable is Xinzhou's packaging materials channel, which achieved a historic high of NT$149 million, a year-on-year increase of 2.14 times and a month-on-month increase of 2.5 times. This surpasses any quarterly revenue performance from last year. The main reason is the inclusion of packaging materials channel performance, and due to the initial impact of fewer working days in the first quarter and the boost from online shopping trends, future growth of over 10% is expected.
Xinzhou Rides the E-commerce Wave
Xinzhou, with its packaging materials channel "Bao Dashi," now derives about 90% of its revenue from packaging materials channels. It has 40 to 50 packaging materials channel points in Taiwan and more than 10 in China, with plans to increase to 15 to 20 this year, including 5 physical locations. The main markets are the Greater Shanghai area, Dongguan, Foshan, Wuhan, and Tianjin.
Xinzhou's original cloud technology services were project-based, and hardware issues have been resolved in the past year or two. Although the contribution is not high, it still continues to generate revenue due to its applicability to channel development and continued profitability.
ACHEM's January revenue, boosted by demand in the American market, reached NT$930 million, a historical second-high. Currently, there are a total of 18 PVC production lines and 17 OPP lines on both sides of the Taiwan Strait, with a PE protective tape line expected to start production in the second quarter at the Yangmei plant. The PVC, OPP, and PE lines completed last year and this year are contributing to revenue. It is estimated that ACHEM's annual revenue could see double-digit growth compared to last year.
ACHEM's Hai'an Project to be Completed by Year-End
In simple terms, the two main raw materials for tape are film and adhesive. YC Group previously purchased these mainly from Formosa Plastics and Nan Ya. However, the group continues to implement its vertical integration policy. ACHEM is currently working on the "Hai'an Project," expected to be completed by the end of the year, which will add six PVC tape lines and six molding lines, with production scheduled to begin next year. The new molding lines are expected to supply nearly 70% of the film demand.
Additionally, the group needs to purchase over 40,000 tons of upstream raw material butyl acrylate (a major component of adhesive) each year. ACHEM's petrochemical division, responsible for upstream raw material supply, has received an investment of 20% premium, amounting to $11.76 million, from Toyota Tsusho, becoming a strategic partner. Together, they will expand acrylate business, with an expected annual production capacity of 80,000 tons.
Furthermore, certified automotive tapes from last year are expected to see exponential growth in shipment volumes this year as the automotive market continues to recover. Automotive products have relatively high profit margins, expected to reach a high level of 18–20%, which will help reduce the proportion of low-margin products.
Overall, it is estimated that the gross profit margin may increase by 2-3 percentage points compared to last year, and with expense ratios under control, ACHEM is expected to continue benefiting from expansion effects and the advantages of upstream and downstream integration. With growth in gross profit margins and economies of scale, operations are expected to continue on a growth trajectory.
Trading Suggestion: Revenue records drive stock prices up, setting a new high since the merger with Tianchi. Moving averages are in a bullish alignment, and the daily KD indicator is crossing upward with increasing volume, favoring short-term gains. Additionally, weekly and monthly KD indicators are extending upward, providing medium-to-long-term protection for short-term gains, with the five-day line as a short-term bullish indicator. |
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