Shanghai Automotive Co Ltd reported a 131% jump in its first-quarter net profit on Wednesday, helped by investment gains from its 20% stake in General Motors’ car plant in the city.
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According to Reuters, Shanghai Auto booked investment income of 610.10 million yuan ($US73.72 million) from only 115.78 million yuan a year ago, though it did not explain the exact source of this money.
But analysts told the news agency it was most likely from its stake in the General Motors joint venture which is based in Shanghai.
Analysts reportedly said Shanghai Auto should book a profit rise of around 30% for all of 2004, citing factors such as rising steel prices.
“We are reluctant to hike Shanghai Auto’s earnings forecast for 2004 as soaring steel prices will bite into its income,” industry analyst Xu Xiang at China Southern Securities told Reuters.
He reportedly added there was no sign that China’s steel prices, which shot up a yearly 40% in the first quarter according to the ministry of commerce, would fall significantly this year.
“It’s unlikely the high rate of sales from GM’s Shanghai venture seen late last year will continue for the rest of 2004,” Xu told the news agency, adding: “So Shanghai Auto will probably be unable to repeat its investment income growth this year.”
Reuters noted that GM’s flagship venture in Shanghai sold 201,188 units in 2003, up 81.6% on 2002, while Shanghai Auto posted net profit of 710.67 million yuan ($85.86 million) in the January-March period from 307.53 million yuan a year ago.
Investment income accounted for 86% of its earnings in the quarter, pushing the vehicle parts maker’s turnover up 21% to 2.04 billion yuan, according to the report published in the official Shanghai Securities News and cited by the news agency.
China’s car output in the first quarter rose 37% to 570,800 units, the State Statistical Bureau said on Wednesday, according to Reuters, which noted that Shanghai Auto’s parent, China’s second-largest vehicle maker, Shanghai Automotive Industry Corp (SAIC), plans to list as a group, possibly overseas, over the next few years as it gears up to become a global brand.
Analysts told Reuters that, despite strong growth over the past two years, China’s car sales were likely to slow this year, due in part to increased stockpiles.
