① In recent years, leading companies in the tire industry, which have increased both revenue and profits, have begun a new wave of capital expenditure. Upstream tire mold-related companies have sufficient orders, and the industry boom is expected to continue. ② An industry insider told the Financial Federation reporter that Chinese tire mold companies are not hesitant to invest in R&D, the technical level of their products is constantly improving, and they have won many orders.
Financial Services Association, Feb. 24 (Reporter Xiao Lianghua) Since 2023, leading companies in the Chinese tire industry, which have increased both revenue and profit, have begun a new wave of expansion; foreign-funded tire companies that rely on price increases to increase sales have begun a new production capacity layout in order to increase profits. The sharp increase in downstream capital expenditure has laid the foundation for the boom in the tire mold industry.
“The tire mold business was pretty good in the second half of 2023.” Li Jing, director of Haomai Technology (002595.SZ), told CFA reporters that Soft Holdings (002073.SZ) also saw a sharp increase in on-hand orders in the first three quarters of last year. On January 30, Julun Intelligence (002031.SZ) announced that the company recently signed hydraulic vulcanizer sales contracts with 10 tire manufacturers. The contract amount exceeded 60% of last year's revenue.
“The tire industry is booming, and the shortage of semi-steel tires has become a common phenomenon in the industry. Therefore, many companies are demanding increased capital expenditure, and the upstream mold industry is expected to continue.” The head of a domestic tire mold company told the Financial Federation reporter that his company is a foreign-funded factory set up in China. In recent years, with the continuous improvement in the quality and performance of domestic tire mold equipment, “many orders have been stolen.”
Downstream increases capital expenditure
Since 2023, tire companies have generally received sufficient orders, strong production and sales, and a sharp increase in performance, which has become the driving force for tire companies to increase capital expenditure.
According to “Tire Business” statistics, from 2023 to February 2024, global tire production capacity invested nearly 100 billion dollars. Among them, investment in car tires increased the most, with an amount exceeding 44.6 billion dollars; followed by investment in off-road tires of more than 7 billion dollars; there was almost no change in investment in truck and bus tires — not only did not increase much investment, but many tire companies also announced the suspension of investment and even directly cut related production capacity.
In terms of domestic tire companies, the Financial Services Association reporter combed through and found that with the exception of individual companies, going overseas and expanding production overseas has almost become a “standard” move for listed tire companies, and the pace is getting faster and faster, and the selection area for overseas bases is also wider. In the next few years, the overseas production capacity of tire companies such as Sailun Tire (601588.SH), Mori Kirin (002984.SZ), and GM (601500.SH) will usher in a new wave of rapid release.
According to statistics from Cheyuan Ruts Network, by the end of 2023, a total of 12 Chinese companies had built a total of 18 tire factories overseas, and 7 tire factories are under construction.
In the second half of 2023 alone, Sailun Tire announced three overseas capital expenditure projects. In December of last year, GM Co., Ltd. announced that its wholly-owned Cambodian subsidiary plans to invest in the construction of the Cambodian High Performance Radial Tire Project (Phase II). Mori Kirin will also continue to promote the global layout.
A relevant person in charge of Mori Kirin said that construction of the company's Morocco base began in October 2022 and is expected to be put into operation in the fourth quarter of this year. The Spanish base is expected to start construction by the end of 2024, and may be put into operation in 2026. Both bases have planned production capacity of 12 million bars of semi-steel.
It is worth noting that the implementation of Thailand's “double reverse” review has further helped Half Steel to go overseas. “Double reverse” is an important variable affecting Chinese tires going overseas. In January 2024, the US announced the final ruling of the anti-dumping review in Thailand. The tax rate is to be lowered from 14.62-21.09% to 1.24-6.16%. The reduction in the tax rate is beneficial to optimizing the profitability of Thai factories and improving competitiveness in overseas markets.
Tire mold companies have sufficient orders
Upstream tire mold companies have benefited greatly from strong downstream capital expenditure, and orders from related companies have increased significantly.
Among them, as of the end of the third quarter of 2023, Soft Control Co., Ltd.'s contract debt was 3,945 billion yuan, up 35.43% year on year, up 12.51% month on month, inventory reached 5.922 billion yuan, up 32.20% year on year, up 16.68% month on month, and orders in progress continued to grow rapidly.
In terms of Haomai Technology, in the first half of 2023, the company's tire mold business revenue was 1.85 billion yuan, an increase of 9% over the previous year. The relevant person in charge of the company said that in the second half of last year, foreign tire mold demand continued to grow steadily, and the company's tire mold business was still good.
In terms of Julun Intelligence, the company announced at the end of January that the total contract amount for hydraulic vulcanizer sales contracts recently signed with 10 tire manufacturers was RMB 5.74 yuan, more than 60% of last year's revenue.
Julun Intelligence said that since the second half of 2023, benefiting from the continuous recovery of domestic economic activity and rising demand from overseas markets, compounding the decline in tire raw material prices and shipping costs, the strong recovery momentum of the tire industry has also provided impetus for tire factories' technical reforms and investment in new overseas plants, driving the increase in orders for the company's related products.
Furthermore, Soft Control Co., Ltd. recently announced that based on the 2024 market forecast and daily production and operation needs, the company and its subsidiaries plan to generate daily related transactions with Sailun Tire and its subsidiaries are expected to not exceed RMB 3,045 billion. From January to November 2023, the actual transaction amount generated by the company and its subsidiaries with Sailun Tire was $1,817 billion.
Some families are happy, some are sad. With the continuous development and expansion of domestic tire mold companies, the living space of some foreign-funded enterprises has been squeezed. The head of a foreign-funded mold company told the Financial Federation that now the technical level of local tire mold companies is getting better and better, and they are investing heavily in R&D. In recent years, “many orders have been taken away by local companies.”