Toyota Boshoku: Orders from BMW in China

by SR on January 25, 2013

Performance of auto parts stocks in Japan, year-to-date

Also exactly a year ago to the day, I wrote a post about tier-1 Toyota group seat and interior supplier Toyota Boshoku and its acquisition of a new customer outside of the Toyota group. In that post I reminded you that the acquisition of Polytec in July 2011 gave Toyota Boshoku access to European customers such as BMW, Daimler and the Volkswagen group. This gradual growth in the customer base is “kind of a big deal”, I observed, “but only over the long term”.

As further evidence of the company’s success in expanding outside Toyota – and remember, the auto industry is a slow-moving beast – CEO Shuhei Toyoda accounted at a media event in Toyota City, Aichi Prefecture on 23 January that Boshoku has taken orders for seats from BMW in China. This is great news. Boshoku supplies the seats and interiors for Toyota’s luxury Lexus brand, so there’s never been any doubt that the quality is there. What has hampered the company has been its excessive reliance on parent company Toyota, which still accounts for about 93% of Toyota Boshoku’s revenues. To get a design win for BMW in its most strategically important market shows that BMW considers Boshoku competitive in terms of price and technology as well as quality.

It’s not been all good news recently though. When I looked at Toyota Boshoku’s results for the July-September 2012 quarter I was disappointed to see that the firm posted a loss in its North American operations despite revenues holding up well. I’m guessing that was costs related to new product ramps, but still, disappointing. The story was the same in the European business: losses on a level of sales that would formerly have allowed them to break even.

As you can see from the chart at the top of the page, Toyota Boshoku has been one of the better performers in the auto parts sector year-to-date. (Measured from the beginning of the current rally on 14 November 2012 the story is the same, as shown by the chart below: Boshoku is one of the top four performers.) So, given that the share price might have got ahead of the fundamentals, I’m not a big fan of the stock at this point. I advise you to look at “cleaner”, more liquid and better known stocks such as Denso. If you like China then Aisin Seiki is usually a reliable mover on the China theme. Results for Toyota Boshoku, Aisin Seiki and Denso for the October-December 2012 quarter are scheduled to be released 1 February 2013.

Performance of auto parts stocks in Japan since most recent market trough in November 2012

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