Tire skeleton materials leading enterprises, capacity release + demand recovery repair can be expected. Daye stock is mainly engaged in rubber tire skeleton material manufacturing. Since listing, production expansion and mergers and acquisitions have led to steady growth in scale. From 2017 to 2022, CAGR was 22.56%. However, due to factors such as rising raw material costs and public health events affecting demand and production, the company's profits have declined. Since 2023, with the recovery of demand and the decline of steel prices, the company's performance has been gradually repaired. 23H1 income / return net profit is 2.67 billion yuan / 77.35 million yuan respectively. Compared with the same period last year, + 7.1% amp 158.7% respectively. The company is currently the largest manufacturer of bead steel wire in China. Shengtong steel cord and steel cord products were acquired in 2021. In 2022, bead steel wire + steel cord products accounted for 90.8% of the company's revenue.
Benefiting from the recovery of the downstream automobile industry, the demand for tire skeleton materials has increased. The tire skeleton material can withstand the internal and external forces of the tire, which has a decisive impact on the function, life and value of the tire. With the development of the automobile industry, the tire skeleton material has gradually realized the transition from chemical fiber to steel wire. For example, the radial tire with steel cord has gradually replaced the bias tire with chemical fiber cord fabric because of its good wear resistance and low rolling resistance. The domestic tire meridian rate has increased from 79% in 2009 to 93.8% in 2021. With the recovery of passenger and freight traffic demand, automobile production / sales in January-August 2023 were + 3.2% and 8.0% respectively compared with the same period last year, leading to an increase in the demand for tire skeleton materials. Under the guidance of the policy, with increasing requirements for lightweight materials and green production, we believe that the tire skeleton material industry will further concentrate on the head enterprises with outstanding advantages in production technology and scale, and the industry pattern will be better.
Product R & D leads the industry and enters the international tire leading supply chain. The production capacity of Daye share bead steel wire is the first in China. In order to make up for the deficiency in the acquisition of Shengtong steel cord, and to complement each other in procurement, production and sales, the annual production capacity of steel cord after the merger exceeds 400000 tons, reaching the top three in China. Further consolidate the leading position of tire skeleton materials. The company has a leading R & D capability, holding a total of 135 valid patents by the end of June 2023, participating in the formulation of standards and leading the industry to higher strength, more corrosion resistance, lighter and other fields. From the point of view of customers, the top five customers of the company are China Strategy rubber, race wheel tire and other domestic large and medium-sized tire manufacturers, and the top five customers of 23H1 account for nearly 30%. The company actively enters Michelin, Bridgestone and other international tire leading supply chains. Large overseas customers have high requirements for product quality and stable supply, and the corresponding sales gross profit margin is higher than that of small and medium-sized tire manufacturers. The company's sales of bead wire to Michelin increased from 470.2 tons in 2020 to 12500 tons in 2022, with a target of 17000 tons in 2023.
Investment suggestion
The company is the leading rubber skeleton material manufacturer in the world, and the sales scale of bead steel wire is the first in China. after the acquisition of Shengtong steel cord, it further expands the steel cord business and expands the production capacity of bead steel wire and steel cord through fund-raising projects. Since 2023, the downstream demand has recovered, raw material prices have stabilized, and the company has the opportunity to repair its performance. We expect the company's 2023-2025 net profit to be 1.53 million million yuan, respectively, and the corresponding PE will be 7.94 times that of 20.22 shock 10.16 shock, giving it a "buy" rating for the first time.
Risk hint
Raw material prices fluctuated sharply; downstream demand was lower than expected; capacity release was lower than expected.