Description of the event
1. The company released its 2023 annual report, achieving annual revenue of 20.07 billion yuan (+18.6% YoY), attributable net profit of 1.39 billion yuan (+376.9% YoY), and non-net profit of 1.30 billion yuan (+622.5% YoY). The company plans to distribute a cash dividend of 2.9 yuan (tax included) for every 10 shares to all shareholders. 2. The company released its 2024 quarterly report, achieving revenue of 5.04 billion yuan (YoY +15.0%), net profit of 440 million yuan (YoY +106.3%), and non-net profit of 430 million yuan (YoY +137.3%).
Incident comments
The boom in 2023 boomed and profits increased significantly. In 2023, the company's tire product production and sales volume was 79.117 million units/779.82 million pieces, respectively. Revenue and performance both achieved significant increases. The overall gross margin was 21.0% (+7.4 pct year over year), of which Q4 gross margin was 24.4% (+9.8 pct year over year, +1.4 pct month over month). The year-on-month increase had a great relationship with falling raw material prices, improving overseas demand, and customer restructuring on the supporting side. The main reasons for the increase in the company's performance in 2023 are: 1) Raw material side: in 2023, the company's main raw materials are natural rubber (-9.0%), synthetic rubber (-9.6% YoY), carbon black (-10.3% YoY), steel wire cord (-10.7% YoY), curtain cloth (-14.3% YoY), the cost pressure decreased compared to 2022; 2) Export side: In 2023, the cost-effective characteristics of China's tires were further highlighted, and the export market share in overseas markets continued to increase; 3) Supporting end: 2023 The company accelerated three structural adjustments around the proportion of supporting high-end brands, mid-high-end models, and high-end products, and continued to enhance its brand influence in global supporting fields, and the profit level has rebounded. Under multiple benefits, the company's performance increased significantly in 2023.
Q1 Sales declined month-on-month, and the price of a single tire increased dramatically. Q1 The company produced a total of 21.553 million tires, -1.8% month-on-month; sales totaled 18.884 million tires, -16.1% month-on-month. According to the company's operating data, Q1's income from a single child was 265.7 yuan, an increase of 16.7 yuan over the previous month. The increase in the price of single tires is mainly due to the company's adjustment of the product structure. With the expansion and launch of the company's production capacity in Serbia and supporting high-end structural adjustments, the price of a single tire is expected to continue to rise.
Production capacity continues to be released under the “7+5” global strategic layout. The company firmly adheres to the “7+5” global strategic layout (that is, 7 production bases in China and 5 overseas production bases). Currently, the company has five production bases in Zhaoyuan, Dezhou, Liuzhou, Jingmen and Changchun in China, and plans to build two other domestic production bases in Shaanxi and Anhui. It has two overseas production sites in Thailand and Serbia, and continues to inspect and build factories around the world. In the future, the company will continue to promote the construction of Jingmen and Changchun plants and Serbian projects, focusing on improving the level of high-end and intelligence. The global layout will continue to increase the company's revenue and profit.
The supporting end structure continues to improve, and the new energy circuit is leading. In 2023, the company's global supporting channel revenue reached 5.60 billion yuan, an increase of 33.7% over the previous year. It actively explores the middle and high-end markets. It cooperates closely with OEMs such as Audi, BMW, Stellantis, and BYD. Various new models will achieve volume supply this year, adding supporting mass production projects such as FAW Hongqi HS7/HS3/H6, BYD Dolphin/Seagull, Geely Galax/Linker, Changan Yida, Celis Blue E5, Brazilian Volkswagen Polo, American and Mexican BMW, Stellantis 6. For models such as Nissan Sylphy/Tiida and Nissan Qashqai, the company's NEV tire lineup exceeded 9 million in 2023, accounting for nearly 24% of the total NEV market. With the increase in NEV ownership and penetration rate, the company's NEV tire replacement market is expected to benefit.
Maintain a “buy” rating. The company is the leading domestic tire supplier in the country. With the implementation of the “7+5” strategy, the global industrial layout has been continuously optimized. Persist in R&D and maintain leading quality. New retail drives continuous channel and brand growth. The company's net profit for 2024-2026 is estimated to be RMB 2.57 billion, RMB 3.24 billion and RMB 4.0 billion, respectively.
Risk warning
1. The commissioning progress of domestic and overseas projects falls short of expectations;
2. Trade frictions have intensified and raw material prices have fluctuated.