Q1 Profit continued to increase year-on-year, optimistic about the company's long-term growth trend, and maintained a “buy” rating
In 2023, the company achieved operating income of 25.978 billion yuan, +18.61% year-on-year, and realized net profit of 3,091 billion yuan, or +132.07% year-on-year. Corresponding to the Q4 quarter, the company achieved net profit of 1,066 billion yuan, +299.26% year-on-year and +8.86% month-on-month. In 2024, Q1 achieved revenue of 7.296 billion yuan, +35.84% year on year, +4.72% month on month; realized net profit to mother of 1,034 billion yuan, +191.19% year on year, -3.06% month on month. We maintain the company's profit forecast for 2024-2025 and add 2026. We expect net profit to be 3.459 billion yuan, 38.59 billion yuan, and 4.749 billion yuan for 2024-2026, and EPS of 1.05, 1.17, and 1.44 yuan respectively. The current stock price corresponding to 2024-2026 PE is 15.7, 14.1, and 11.4 times. We are optimistic that tire demand will continue to recover, the global market share of Chinese tires will increase steadily, and the company's production capacity expansion is expected to drive the company's long-term growth and maintain a “buy” rating.
The increase in Q1 sales led to revenue growth, and the price of raw materials was basically stable. According to the company's operating data announcement, the purchase price of the four main raw materials of 2024Q1 natural rubber, synthetic rubber, carbon black, and steel wire cord increased by 1.72% year-on-year, down 1.06% month-on-month, and remained stable; on the demand side, the company sold 16.58 million tires in 2024Q1, up 11.05% from 2023Q4, but the Q1 single price was 419 yuan/piece, down 5.06% from 2023Q4. In the future, along with the gradual recovery of domestic consumption and the continuous improvement of the global competitiveness of China's tire brands, the prosperity of China's tire industry is expected to continue to recover.
The plan is to build a new base in Indonesia, and the global layout continues to be improved to promote the company's long-term development. According to the company's March 2024 announcement, the company plans to invest in the construction of a project with an annual output of 3.6 million radial tires (3 million semi-steel tires plus 600,000 all-steel tires) and 37,000 tons of off-road tires in Indonesia. In addition, in October 2023 and January 2024, the company's Cambodia plant invested in a new project with a total annual output of 12 million semi-steel radial tires; in December 2023, the company plans to invest 240 million US dollars to build the “Mexico Project with an annual output of 6 million semi-steel radial tires”. Up to now, the company plans to build an annual production capacity of 26 million all-steel radial tires, 103 million semi-steel radial tires, and 447,000 tons of off-road tires. The company's many projects under construction are expected to drive continued growth in performance, and the company's advantages in scale may be further highlighted in the future.
Risk warning: insufficient downstream demand, production capacity release falling short of expectations, large fluctuations on the cost side, etc.