Incidents:
On April 27, 2024, Triangle Tire released its 2023 annual report and 2024 first quarter report: achieved operating income of 10.422 billion yuan in 2023, +13.03% year on year; realized net profit of 1,396 billion yuan, +89.29% year on year; realized net profit without return to mother of 1,178 billion yuan, +117.37 year on year; gross sales margin of 21.51%, +6.68pct year on year; net sales profit margin of 13.40%, year-on-year +5.40pct; net cash flow from operating activities was 17.98 billion yuan 100 million yuan, +20.95% YoY.
In the 2023Q4 quarter, the company achieved operating income of 2,552 million yuan, +5.65% year over year, -4.59% month on month; realized net profit of 339 million yuan, +26.70% year on month, -24.62% month on month; net profit after deducting non-return to mother was 287 million yuan, +31.96% year on year, -26.66% month on month; net cash flow from operating activities was 485 million yuan, -15.92% year on month, and +34.94% month on month. Gross sales margin was 21.72%, +3.53 pct year on month, -2.56 pct month on month; net sales margin was 13.28%, +2.22 pct year on year, -3.53 pct month on month.
At the same time, the company announced its report for the first quarter of 2024. In a single quarter of 2024Q1, the company achieved operating income of 2,385 million yuan, -2.93% YoY; realized net profit of 294 million yuan, +26.92% YoY, -13.22% YoY; net profit after deducting net income of 242 million yuan, +34.47% YoY and -15.65% YoY; net cash flow from operating activities was 0.2 billion yuan, -97.50% YoY and -99.61% YoY. The gross sales margin was 20.78%, +2.87 pct year on year, -0.94 pct month on month; the net sales margin was 12.33%, +2.91 pct year on year, -0.95 pct month on month.
Investment highlights:
Production and sales increased year-on-year, and the company's performance increased sharply in 2023, achieving operating income of 10.422 billion yuan, +13.03% year-on-year; achieving net profit to mother of 1,396 billion yuan, +89.29% year-on-year. Among them, in 2023, the company achieved gross profit of 2,242 billion yuan, year-on-year +884 million yuan; period expenses of 769 million yuan, year-on-year +089 million yuan; asset impairment losses of -0.39 million yuan, year-on-year -0.07 billion yuan, mainly due to the termination of the US factory project in 2022 and the impact of ongoing construction; and credit impairment losses of -0.09 million yuan, year-on-year - 0.03 billion yuan, mainly due to increased revenue accounts. In terms of period expenses, the company's sales expenses in 2023 were 3.82%, +0.11pct year on year; management expenses were 2.47%, -0.08pct year on year; R&D expenses were 1.40%, -0.15pct year on year; financial expenses were -0.30%, +0.12pct year on year, respectively. In terms of tire production and sales, in 2023, the company achieved a tire production volume of 24.1728 million tires, +7.52% year over year; achieved sales volume of 25.6845 million tires, +15.63% over the same period last year.
In 2023, Q4 achieved net profit of 339 million yuan, or -111 million yuan month-on-month, and realized gross profit of 554 million yuan, or -95 million yuan month-on-month. Expenses for the period were 208 million yuan, or +06 million yuan month-on-month.
Tire production and sales declined month-on-month, and 2024Q1 performance declined
According to the company's first quarter results report, 2024Q1 achieved net profit of 294 million yuan, or -45 million yuan month-on-month. The decline in profit mainly affected by the decline in tire sales. 2024Q1 achieved gross profit of 496 million yuan, or -59 million yuan month-on-month. In terms of expenses, 2024Q1 sales expenses were 99 million yuan, -0.06 million yuan month-on-month; management expenses were 59 million yuan, -14 million yuan month-on-month; R&D expenses were 0.29 million yuan, or -014 million yuan month-on-month; and financial expenses were -0.09 million yuan, or +0.04 billion yuan month-on-month. 2024Q1's asset impairment losses were -0.19 billion yuan, or -0.17 billion yuan month-on-month. In terms of tire production and sales, 2024Q1 achieved a tire production volume of 5.7241 million tires, -8.14% month-on-month; achieved sales volume of 5.8679 million tires, or -4.42% month-on-month.
Optimize product structure and enhance competitive advantage in the market
The company's production and operation are relatively steady. The company's production capacity is about 26.88 million pieces. In 2023, the company produced 24.17 million tires of all types, with a capacity utilization rate of 89.93%. At the same time, the company insists on R&D and innovation, continuously optimizes the product structure, continuously improves product performance, and promotes product performance, greening, differentiation and intelligence. In 2023, the company launched 117 new products. Commercial vehicle tires have been approved by OEMs such as Yutong, Jinlong, Zhongtong, and BYD; passenger car tires have entered the SAIC-GM-Wuling passenger vehicle system, developed OEM projects such as Hyundai Kia, SAIC-GM-Wuling, Geely, Zhengzhou Nissan and Jiangling, and completed performance recognition for projects such as Hyundai Kia, Zhengzhou Nissan, etc., to achieve supply to various projects such as Geely and SAIC-GM-Wuling. Engineering tires have carried out high-end supporting cooperation with Caterpillar, Komatsu, etc., and completed batch support for new energy vehicles with Caterpillar's Qingzhou plant, Great Wall Heavy Industries, Shanghai Sany, Longgong, etc.; special tires have completed the development of next-generation all-terrain off-road tire pattern products, and 18-inch diameter industrial radial tires have achieved product support for various types of special vehicles used for bridge transport.
Profit forecasts and investment ratings estimate that the company's 2024-2026 revenue will be 111.32, 117.45, and 12.486 billion yuan, and net profit to mother will be 16.02, 17.26, and 1,859 billion yuan respectively, corresponding to PE of 8.58, 7.97, and 7.40 times, respectively. Considering the steady operation of the company and continuous optimization of the product structure, this is compounded by the high boom in the tire market and covered for the first time, giving a “buy” rating.
Risks indicate international trade risks; new product promotion falls short of expectations; global market competition risks; raw material price fluctuations; exchange rate fluctuation risks, etc.