Incident: On April 25, 2024, the company released the 2023 Annual Report & 2024 Quarterly Report: (1) Achieved operating income of 5,064 billion yuan in 2023, yoy +22.91%; realized net profit of 216 million yuan, yoy +1175.49%; deducted non-net profit of 196 million yuan, yoy +2733.55%. Among them (2) 2023Q4 achieved revenue of 1,385 billion yuan, yoy +63.60%, qoq -3.74%; realized net profit to mother of 58 million yuan, yoy +1083.23%, qoq -42.57%; deducted non-net profit of 57 million yuan, yoy +419.90%, and qoq -39.51%. (3) 2024Q1 achieved revenue of 1,443 billion yuan, yoy +37.58%, qoq +4.23%; realized net profit of 153 million yuan, yoy +1270.57%, qoq +164.65%; deducted non-net profit of 149 million yuan, yoy +14374%, and qoq +162.50%.

Overseas projects are being implemented at an accelerated pace, and the company's production capacity continues to increase. Currently, the production capacity of the first phase of the Thai base of 1.3 million steel and 6 million pieces of semi-steel has reached full production, and the second phase of the project is also under construction, which is expected to contribute to the increase in 2025; the production capacity of the first phase of the Cambodian base is currently in the phase 1 phase of production capacity climbing. The second phase of the project plans to start construction of 3.5 million semi-steel tires and 750,000 all-steel tires. In the future, as the production capacity of the company's overseas bases increases dramatically, the company's operating income and profitability will increase markedly.

Demand in the tire industry is booming, and the US tire import data exceeds the same period in the past 5 years. According to data disclosed by the US International Trade Commission, the import volume of US tires continues to exceed expectations. In January and February 2024, the US imported 13.5582 million, 13.374 million semi-steel tires, 5.0427 million and 4.948 million steel tires respectively. The import volume has all exceeded the same period in the past five years. Demand for tires is strong, and the company's performance is expected to continue to benefit from the boom in the tire industry.

Investment advice: We expect the company's net profit to be 6.74 billion yuan, 10.04 billion yuan, and 1,470 billion yuan respectively, EPS 0.42, 0.63 and 0.92 yuan, respectively, and the PE corresponding to the closing price on April 25 will be 14, 9, and 6 times. Considering that the production capacity of the company's layout has entered the implementation period and that domestic tires are leading in cost performance, the company's performance will maintain an upward trend and maintain the “recommended” rating.

Risk warning: sharp fluctuations in raw material prices, sharp rise in shipping costs, falling short of expectations in production capacity construction and commissioning, large exchange rate fluctuations, etc.