Shareholders have increased their holdings of the company's shares, demonstrating confidence in future development: on December 25, 2017, the company announced that the company's controlling shareholder, Shuangxing Group, will use its own funds in the secondary market through the securities trading system of the Shenzhen Stock Exchange. the amount of increase is not less than 50 million yuan and not more than 200 million yuan. On December 22, 2017, the company announced that the major shareholder "China Merchants Wealth-China Merchants Bank-Guoxin Financial Control No. 1 Special Asset Management Plan", Guoxin Capital increased its stake in the company through the trading system of Shenzhen Stock Exchange through centralized bidding. Before this increase, the holders and their concerted actors "China Merchants Wealth-China Merchants Bank-Guoxin Financial Control No. 1 Special Asset Management Plan" accounted for 7.06% of the company's total share capital; after this increase, this figure increased to 11.13%. This series of actions fully demonstrate the shareholders' confidence in the future development of the company and the recognition of the long-term investment value.
Equity incentive sets the bottom line of performance and binds the interests of the team to benefit long-term development: on December 19, 2017, the company announced the equity incentive plan, which intends to grant 2000.00 restricted shares to a total of 315 directors, senior managers, middle managers and core backbone personnel, accounting for 2.96% of the total share capital. The grant price of restricted shares is 3.14 yuan per share. The equity incentive unlocking requirement is based on the average net profit from 2013 to 2015. The growth rate of net profit in 2018 Unix 2019 will not be less than 150%, 180%, 230%. Based on the average rate of return on net assets from 2013 to 2015, the growth rate of ROE in 2018 will be no less than 65%, 75% and 95%, and the proportion of the company's main business income to operating income will be no less than 90%. And set personal performance appraisal goals. Equity incentive targets, including directors / executives, are middle managers, core backbone personnel, bound to the interests of the business backbone, the current launch of the incentive plan is conducive to the long-term development of the company.
Tianjiao prices fell sharply, the company's profit space will be released: natural rubber prices doubled between the end of last year and the first quarter of this year, resulting in large losses in the industry in the second quarter of last year, and the company's profit space has also been squeezed to a certain extent. Since the third quarter, the price of natural rubber has gradually fallen back to the bottom, and the pressure on the cost side has slowed down. Superimposing the expected increase in natural rubber supply in the next two years, the probability of a sharp rise in natural rubber prices is not high, so the company's profit space will be released in the next two years. With the rapid rise of self-brand car companies and huge car ownership, tire demand is expected to meet high growth: although China's automobile industry is developing rapidly, due to historical reasons, joint venture brands have been dominant. Joint venture brand car companies already have a complete supply chain system before entering China, and after entering China, they also bring these spare parts, including tires, to China. Therefore, for a long time, it is difficult for national tire brands to enter the vehicle matching market. However, with the development of national automobile industry, the rapid rise of independent brand cars, such as Geely, Great Wall and BYD, is a great opportunity for national tire brands to enter the whole vehicle supply chain; according to the growth law of foreign automobile market, automobile production and sales soar for several years, with the increase of tire wear and functional degradation, the demand for replacement tire will increase greatly, and the replacement tire market is expected to usher in high-speed growth.
Investment advice: natural rubber prices fell sharply in the second half of 2017 and are likely to fluctuate at the bottom in the next two years. Demand-side growth is expected to rise. We estimate that the company's EPS will be 0.18,0.23,0.30 yuan respectively from 2017 to 2019, and the corresponding PE will be 35X, 27X and 21X respectively, maintaining a "highly recommended" rating.
Risk hint: tire industry boom decline risk, additional issuance failure risk.