Domestic high quality bead steel wire leading company
1) the company was founded in 2003, the main products are bead steel wire, steel cord and hose steel wire, mainly used in passenger car tires, truck tires, engineering tires and aviation tires and other tire products. 2) the company's customers include China Strategy, Fengshen, Racing Wheel, double Star, Triangle and other domestic well-known tire enterprises, as well as international well-known tire enterprises such as Sumitomo, Bridgestone, Cooper, Hantai, Jinhu and so on. 3) the company is the largest supplier of bead steel wire in China, with a domestic output market share of 28.35% in 2017, while steel cord still accounts for less than 3% of the market, with great potential in the future.
Steel cord products and overseas markets become growth points
1) the bead wire business is expected to maintain steady and rapid growth, with a steady and small increase in market share. As the company increases the research and development of high-performance steel cord products and capacity expansion, while continuing to open up the middle and high-end tire market and customers, the steel cord business is expected to continue to grow rapidly and become a new sustainable growth point. 2) the annual compound growth rate of the company's overseas revenue in 2013-18 is significantly higher than the overall revenue growth rate in the same period, and the proportion of overseas revenue continues to increase from 7.08% in 2015 to 15.94% in 2018. In the future, as the company increases the market development of international and domestic tire enterprises' overseas business, and relies on the cost-effective advantage to increase its overseas market share, the company's overseas revenue is expected to maintain rapid growth. 3) profitability is expected to improve. With the production of high-performance projects, the improvement of product structure and the appearance of scale effect, the gross profit margin of the company's steel cord and bead steel wire business is expected to continue to increase steadily, among which the steel cord business is expected to be close to the international level of the domestic leader. At the same time, as the export of high value-added products continues to grow, the export gross margin is expected to continue to rise in the future.
The proportion of small and medium-sized enterprises is relatively low, and the impact of bad debts can be controlled.
The latest 2019 mid-term report revealed that the company set aside 66.6457 million yuan for bad debts, and there was no bad debt loss in the current period. The company's bad debt losses have improved significantly since 2017, which we expect to be related to the company's strengthening the management of accounts receivable. In the future, by actively developing high-quality customers, increasing the revenue share of high-quality customers, and strengthening the payback management of small and medium-sized customers, we expect that the final loss of bad debts will have a limited impact on the company's profits.
Profit forecast, covering "overweight" rating for the first time
We estimate that the company's operating income in 2019-21 will be 28.48 million yuan, an increase of 16.75 percent, 19.17 percent, 22.31 percent, and a net profit of 1.80 percent, 2.21 million, and 21.73 percent, respectively. The corresponding PE for 2020-21 years will be 119 times. Lower than the average value of comparable companies in the tire industry, according to the average PE of comparable companies in the industry, the reasonable price of the company in 2020 is 10.64 yuan, giving a "overweight" rating for the first time.
Risk tips: automobile and tire industry downturn exceeded expectations; the impact of the epidemic exceeded expectations; the company's market development was lower than expected; raw material price increase risk; exchange rate fluctuation risk