Incidents:
On April 26, 2024, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved total operating income of 10.422 billion yuan, +13% year on year; net profit to mother of 1,396 billion yuan, +89% year over year; and basic earnings per share of 1.75 yuan. Among them, the 2023Q4 company achieved total operating revenue of 2,552 million yuan, +6% year-on-month, and -5% month-on-month; net profit to mother was 339 million yuan, +27% year-on-year and -25% month-on-month.
2024Q1 achieved total revenue of 2,385 million yuan, -3% YoY and -7% month-on-month; net profit to mother was 294 million yuan, +27% YoY and -13%.
Sales growth combined with cost decline. Net profit in 2023 surged year on year, and the company's net profit increased year on year in 2023, mainly due to the gradual recovery in domestic and foreign demand and the decline in raw material prices. In 2023, the company achieved a year-on-year increase of 7.5%/15.6% in tire production/sales volume of 2417/25.68 million pieces; in the domestic/international market, the year-on-year increase of 20%/12% year-on-year tire sales, with significant increases in sales in Europe and the Middle East and Africa regions. Benefiting from the decline in raw material prices, the company's gross sales margin/net margin increased 6.7pct/5.4pct to 21.5%/13.4% year on year in 2023; domestic/foreign gross margin increased 6.5 pct/7.1pct year on year to 16.1%/24.7% year on year. 2023Q4's revenue and profit declined month-on-month, mainly affected by rising raw material procurement prices, and gross sales margin/net margin fell 2.6/3.5pct month-on-month to 21.7%/13.3%.
Sales of 2024Q1 tires fell 4% month-on-month, and profitability remained stable due to the traditional off-season. Sales of 2024Q1 tires fell 4% month-on-month to 5.87 million units. 2024Q1 natural rubber/synthetic rubber/steel cord/carbon black procurement prices were +6.4%/+3.1%/+2.4%/-6.5%, respectively. Profitability is stable, gross margin/net margin -0.9/-1.0pct month-on-month to 20.8%/12.3%. In response to the continued rise in raw material prices, the company has increased the prices of various passenger car tire product lines by 2-3% since March 29, 2024.
Product Innovation Overlays Brand Building Continues to Empower
In 2023, the company continued to optimize the product structure, continuously improve product performance, strengthen product iterative evolution, and launch 117 new products throughout the year. Furthermore, in 2023, the company continued to launch high-speed rail advertisements to help the German TriangleSchwerin sailing team launch the 20er Jollenkreuzer class yacht race, titled the “Triangle Tire Cup” 2023 China Weihai Super Triathlon Series, etc., continuing to enhance the influence of the “Triangle” brand.
Profit Forecasts, Valuations, and Ratings
The company is an established leading domestic tire company. We expect the company's revenue for 2024-2026 to be 116/120/12.2 billion yuan, with year-on-year growth rates of 11%/4%/2%, respectively, net profit to mother of 14.6/16.4/1.76 billion yuan, with year-on-year growth rates of 5%/12%/7%, and EPS of 1.83/2.05/2.19 yuan/share respectively. In view of the continuous optimization of the company's product structure and reference to comparable company valuations, we gave the company 13 times PE in 2024, with a target price of 23.8 yuan, maintaining a “buy” rating.
Risk warning: risk of large fluctuations in raw material prices; risk of downstream demand falling short of expectations; risk of the company's product promotion falling short of expectations