Johnson Controls Seeks To Accelerate Growth With A New Battery Plant In China

Jun 5 2014, 12:48pm CDT | by

Johnson Controls has expanded its automotive battery production capacity in China with the inauguration of a new plant in Chongqing City, western China. The company announced Wednesday, June 4, the opening of this new plant, which will produce 6 million auto batteries per year for the China market. We figure this additional production capacity will enable Johnson Controls to increase its gains from the fast growing Chinese auto market, which is the world’s largest with 22 million vehicles produced annually. The company already has one major auto battery plant in Changxing, in eastern China, from where it produces around 8 million batteries per year. With the addition of this new plant, Johnson Controls will likely be able to accelerate growth in its auto battery segment which constituted roughly 15% of its $42.7 billion revenues last fiscal. In terms of profit contribution, though, the company’s auto battery segment constitutes nearly a third of its total operating profits, as margins in this segment are much higher than those in the remaining segments of the company. Thus, we figure sales and profits from this additional battery production capacity in China will drive significant growth in the company’s overall profits in the coming years. In the current fiscal, which ends on September 30, 2014, Johnson Controls anticipates revenues from its auto battery segment to grow by 7-8% annually.
/>

We currently have a stock price estimate of $51 for Johnson Controls, around 5% ahead of its current market price.

See our complete analysis of Johnson Controls here

Chinese Auto Market Will Drive Long Term Growth At Johnson Controls’s Auto Battery Segment

Johnson Controls entered the Chinese automotive supply market with batteries in 2005. Since then the company has expanded in manifold ways in the country through investments in new plants and joint ventures (JVs). Johnson Controls’s revenues from China, including sales from its non-consolidated JVs, have grown from a mere $2.9 billion in 2009 to over $7.2 billion currently. These figures also include sales from the company’s other segments, namely auto interiors and building efficiency products, the latter of which provides heating, cooling and ventilation systems. Going forward, Johnson Controls expects its strong growth from China to continue and its revenues (including those from non-consolidated JVs) from the country to rise to $12.5 billion by 2018. In our view, this solid growth from China is achievable as both construction spending and automotive production are rising from the country. In the recently concluded March quarter, higher automotive industry production in China was the primary driver of growth in Johnson Controls’s top line. In the quarter, automotive industry production in the country rose by 9% annually – nearly double the rate at which it grew in North America and Europe. Thus, the automotive sector in China is growing strongly and Johnson Controls through expansion in its battery production capacity is seeking to get a larger share of this growth. Currently, the company’s auto battery segment generates more than three-fourth of its sales from the mature and slower growth markets of North America and Europe. But, given the higher growth from China, we figure the geographic-mix in the segment’s revenues will shift in favor of China. The company is currently also building a new corporate headquarters in Shanghai reflecting its long term growth expectation from this market.

Additionally, despite more than two decades of strong growth, the Chinese automotive market has significant growth potential left, in our view. This is explained by the fact that vehicle ownership rates in the country are well below those in the developed markets such as the U.S.. There are currently around 105 vehicles per 1,000 people in China, compared with over 700 in the U.S. and other developed markets such as Australia. Thus, Johnson Controls’s increasing presence in the Chinese auto market will not only help accelerate its growth in the near term, but also position it for steady growth in the long term.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Get Trefis Technology/>

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

IPad Air Giveaway 2014 is Online
IPad Air Giveaway 2014 is Online
Our sister site I4U News is giving away a brand new iPad Air or if you can wait an iPad Air 2. This is an $499 value.
 
 
Your Parent Or Kid Moved In: Are You Covered?
A record 57 million Americans now live in multigenerational family households — double the number in 1980, according to a new Pew Research Center study. And I bet many of them have the wrong homeowner’s or renters...
 
 
Pandora Looks to Challenge Terrestrial Radio's Dominance in Cars
Pandora Media is one of the largest Internet radio providers in the U.S. with more than 75 million active users. While the company’s active user count has increased at a robust pace historically, it is likely to slow...
 
 
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
It’s January 2026. New York Yankees owner Hal Steinbrenner gets out of his driverless car and triumphantly marches before the gathered press to introduce his prized new free agent. It’s a record-breaking contract—over...
 
 
 

Latest from the Network

European Champions League standings
Paris, Oct 22 (IANS) Following are the European Champions League standings for Groups E to H after Tuesday's matches (tabulated under matches played, won, drawn, lost, goals for, against, points), according to Xinhua...
Read more on Sport Balla
 
Rogerio set to break Giggs world record
Rio de Janeiro, Oct 22 (IANS) Sao Paulo goalkeeper Rogerio Ceni is one victory away from earning his fourth Guinness World Record by eclipsing a mark held by Manchester United legend Ryan Giggs. The 41-year-old will...
Read more on Sport Balla
 
Ryan Reynolds can't keep his hands off Blake Lively
Ryan Reynolds was ''really sweet'' to Blake Lively at the Angel City Ball. The couple, who got married in September 2012, made their first red carpet appearance together in New York City on Monday night (10.20.14) since...
Read more on Celebrity Balla
 
Kris Jenner doesn't know who Bruce Jenner is dating
Kris Jenner has ''no idea'' whether Bruce Jenner is dating her best friend. The 58-year-old reality TV star, who split from the Olympic gold medallist last October after 23 years of marriage, claims she doesn't know if...
Read more on Celebrity Balla
 
When Rihanna dressed like 'Harry Potter'
New York, Oct 22 (IANS) Singer Rihanna was spotted here in a Harry Potter style costume. She wore the wizard-like get-up while heading for a business meal here Monday, reports mirror.co.uk. The 26-year-old combined a...
Read more on Celebrity Balla
 
Germany raises humanitarian aid to Iraq
Berlin, Oct 22 (IANS) Germany has pledged a further 20 million euros (about 25.5 million dollars) in humanitarian aid to Iraq, the foreign ministry said in a statement Tuesday. The additional funds are immediately...
Read more on Politics Balla
 
India calls on Israel, Palestine to resume peace process
United Nations, Oct 22 (IANS) India has called upon Israelis and Palestinians to resume the peace process as "dialogue remains the only viable option" to address the issues confronting the region. In a brief statement...
Read more on Politics Balla
 
Airstrikes help ground forces fight IS: Pentagon
Washington, Oct 22 (IANS) Kurdish forces are in control of the majority of the Syrian city of Kobane despite efforts by the Islamic State (IS) to take the town, a spokesperson for US defence department said Tuesday....
Read more on Politics Balla
 
Palestine, Israel urged at UN to halt unilateral initiatives
United Nations, Oct 22 (IANS) UN Secretary-General Ban Ki- moon Tuesday called on Palestine and Israel to overcome differences and halt unilateral initiatives that fuel mistrust, so as to pursue long-term stability in...
Read more on Politics Balla
 
China urges Israel to create conditions for peace
United Nations, Oct 22 (IANS) Chinese government has called on Israel to create necessary conditions for the resumption of peace talks with Palestine. At an open debate of the Security Council on the situation of the...
Read more on Politics Balla