This report is read as follows:
The company is a leading enterprise in China's tire skeleton industry, with a market share of about 25% of bead wire. Benefiting from the increase in gross profit margin brought about by the stabilization of raw material prices and the expansion of the company's production capacity, the company's performance may exceed expectations.
Main points of investment:
Coverage for the first time, giving a "overweight" rating. The company is the leading enterprise in the tire skeleton industry in China, and its industry position is stable. We predict that the EPS of the company from 2018 to 2020 is 0.94,1.31,1.66 yuan respectively. Refer to similar companies, give the company 2018 PE 23.36X valuation, corresponding to the value of 21.96 yuan per share, "overweight" rating.
Benefiting from the stabilization of raw material prices and the expansion of the company's production, the company's performance may exceed expectations. The price of the company's main raw materials fell steadily in 2018, and the reduction of cost-side pressure led to an increase in gross profit margin; the output of the superimposed company continued to rise, the company's profits improved steadily, and the performance may exceed expectations.
The price of raw materials stabilized and the company's gross profit margin rebounded. The company's raw material prices continued to rise in 2017, and the average price of Jinan high-speed line in the first-fourth quarter was 3783, 3706, 4259 and 4644 yuan / ton. it took about one month for the price of the company's finished products to be transmitted downstream, and the company's gross profit margin declined. Since 2018, the average price of Jinan high-speed line is 4215 yuan / ton, the company's raw material prices have fallen steadily, and the company's gross profit margin has rebounded.
The competition pattern of the industry is good, the production capacity continues to expand, and the company's performance will be released gradually. The domestic market share of the company's bead wire products is maintained at about 25%, which is the leader of the industry and participates in the formulation of industry standards. After extensive development, the bead wire industry has a stable pattern and high barriers to entry. After the initial public offering of shares and convertible bonds, the expansion of production capacity and production will be more smooth.
As the leader of the industry, with the improvement of its own production capacity, the competition pattern of the industry will be more beneficial to the company. While the downstream tire industry capacity utilization continues to remain high, the company's output will gradually increase, and the company's performance will be gradually released.
Risk hint: tire production has fallen sharply; wire rod prices have risen sharply.