The industrial manufacturer Eaton Corporation (ETN) expanded its Chinese footprint when it inked a joint venture with Shanghai Aircraft Manufacturing Co. Ltd. (“SAMC”), a subsidiary of Commercial Aircraft Corporation of China (“COMAC”).
In this joint venture, formed to support COMAC’s C919 single-aisle commercial aircraft program, Eaton will have a 49% interest while its Chinese counterpart will hold the remaining interest.
The joint venture will primarily focus on the design, development, manufacturing and support of fuel and hydraulic conveyance systems of the aircraft. The joint venture has also plans to supply conveyance systems to other aircraft and engine manufacturers in China and the rest of the world.
Eaton is the first foreign partner selected for the C919 program, the estimated value of which, including aftermarket opportunities, is pegged at $1.8 billion, based on an anticipated volume of 2,500 airplanes.
Eaton started working in China, from 1993, through a joint venture in Jining, Shandong Province. Since then the company is working relentlessly to expand its operation in that country.
The company’s most recent acquisition, dating back to October 2010, was the purchase of the remaining 50% stake in Chloride Phoenixtec Electronics, a China-based manufacturer of uninterruptible power supply.
We believe Eaton’s association with the C919 aircraft program is beneficial for the company, as it presages a rapid development in the Chinese aerospace industry. The venture would further boost the company’s revenues from the Asia Pacific region. Eaton’s Asia Pacific sales grew 31.3% in 2010.
Eaton Corporation currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock. The company competes with ITT Corporation (ITT) and Parker Hannifin Corporation (PH).
Cleveland, Ohio-based diversified power management company Eaton Corporation is a leading supplier of power accessories in the aerospace industry and has customers in 150 countries.
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