LISTED JUST last month at 22 cents, leading Chinese mold maker China Kunda attracted 6 analysts and one stock trader to its 1H09 briefing this morning.
Here's a summary of the Q&A session:
Q: Who are your customers?
We have two major business segments – in-mold-design (IMD) plastic injection parts and molds.
Our IMD customers are original equipment and original design manufacturers of a diverse range of consumer electronic goods carrying up-market brands such as Walt Disney, LG, Sanyo and Whirlpool.
Our mold customers are even more diversified. 55%-60% of our molds are for automobile makers, which include luxury models such as Audi and BMW.
We have two niche mold products for luxury automobile parts – plastic air intake manifold mold and low-pressure mold.
The plastic air intake manifold is a substitute for the traditional steel manifold in channeling air to support engine combustion. Plastic is superior to steel in being able to cut fuel consumption by up to 8%.
Low-pressure molding enables the attachment of upholstery to car interiors without using adhesives.
”New car smell” is a symptom of toxic fumes emitting from adhesives, for example.
Q: What is your mold capacity?
A: Molds range in shapes and sizes ranging from width of a few cm to over one meter. We can make 500-1,000 molds a year, with factory-gate price ranging from Rmb 300 to Rmb 10,000 per mold.
Current capacity allows us to generate sales value equivalent to Rmb 150 million a year.
We are planning to expand capacity.
Q: How different are IMD parts compared to normal plastic injection molded parts?
A: Graphical design and silk-screen printing are added before injection molding, unlike normal plastic injection molded parts where graphics are printed only at the end.
This means that IMD parts are far more superior in wear-and-tear resistance and are used by consumer electronic manufacturers to distinguish their best models from the mundane.
It also means that the factory gate price of one IMD part can command at least 3 times that of a normal plastic injection molded (PIM) part.
Production cost however, is only slightly higher. Our IMD segment margins are as high as 73%, compared to 7.4% for PIM during 1H09.
Q: Given your high margins, what is the threat of new entrants competing to supply IMD parts?
A: So far, few plastic mold makers have reliably supplied quality IMD service.
Our rejection rate ranges from 25% to 30%. This is better than other companies who usually waste 40% or more.
At the same time, our R&D efforts will lower our rejection rate as well as roll out new products in the future.
Q: How much will China Kunda pay for Shenzhen Precision’s business assets?
A: We estimate Rmb 33 million worth of production equipment. Part of this will be offset against Shenzhen Precision’s trade debts outstanding, for which we will assume responsibility.
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