Incident Overview
The company publishes the 2023 Annual Report and the First Quarter 2024 Report. In 2023, the company achieved operating income of 5,064 billion yuan, a year-on-year increase of 22.91%; net profit to mother was 216 million yuan, an increase of 1175.49% year-on-year, after deducting net profit of 196 million yuan, a year-on-year increase of 2733.55%; EPS 0.14 yuan.
In Q1 2024, the company achieved operating income of 1,443 billion yuan, a year-on-year increase of 37.58%; net profit to mother was 153 million yuan, an increase of 1270.57% year-on-year; net profit after deducting non-return to mother was 149 million yuan, an increase of 14373.67% year-on-year.
Analytical judgment:
Strong production and sales, huge increase in profits
1) Strong domestic and foreign demand led to a sharp rise in production and sales: in 2023, the company's tire output was 11.976 million, up 39.13% year on year, sales volume was 11.8605 million, up 38.90% year on year, inventory volume was 2.1743 million tons, down 12.15% year on year. The company's overseas layout entered the harvest period, Thai factory orders continued to be in short supply, and the Cambodian factory's production capacity continued to rise and profitability increased. 2) Seize the opportunity of falling raw material prices and shipping costs, and implement an end-to-end cost reduction project: In 2023, the prices of natural rubber/synthetic rubber/carbon black/steel cord, which are the top four raw materials purchased by the company, decreased by 12.55%/15.73%/9.87%/10.42% year-on-year, respectively; in addition, the company continued to promote end-to-end cost reduction projects, promote “platformization, generalization, and componentization” to raise the company's gross profit level. 3) 2024Q1 net margin reached a record high: In 2023, the company's gross sales margin was 15.64%, up 6.05 pct year on year, and the gross margin of 2024Q1 was 18.05%, down 2.54 pct from month to month. The net margin was 10.59%, a record high, and an increase of 6.42 pct month-on-month. We believe that in the context of strong overseas demand, the company's overseas base expansion, domestic and foreign product restructuring, and sales market adjustments are the main reasons for the company's profitability to reach record highs, showing the company's excellent strategic vision and efficient execution Execution efficiency. In 2023, the company's sales/management/R&D/finance expenses ratio was 3.02%/3.34%/1.51%/2.46%, respectively. Among them, sales expenses increased by 33.46% year on year, or sales expenses increased due to the recovery in the tire industry and increased market demand.
Optimistic that the two major overseas bases will lead continuous growth
1) At present, the company's all-steel tire/semi-steel tire/off-road tire design capacity is 585/3250/ 100,000 tires, respectively. The Thai factory (phase I) has reached production capacity; the Cambodia plant (phase I) opened in May 2023 and is in the phase of capacity climbing and rapid release. Currently, the production capacity of all steel/semi-steel tires is 50/3 million tires, respectively, and is expected to be fully produced in 2024; the Thailand plant (phase II) and the Cambodia plant (phase II) have already started construction and are expected to be put into operation in 2025, looking forward to the development of overseas bases to enhance the company's profits Competence and international competitiveness. 2) The company's overseas base focuses on the three major markets of the United States, Europe and Southeast Asia to enhance profitability: In 2023, the company successfully developed a number of large importers and traders in Europe, America, Southeast Asia, etc., and enhanced brand influence by participating in international tire exhibitions such as the US SEMA, Shanghai, Vietnam, and Panama, showcased the cost-effective advantages of the company's products, enhanced the company's international popularity, and strengthened overseas profitability.
Investment advice
The company's overseas dual bases have been completed. Following the launch of production volumes at the Thai and Cambodian bases, the company's strong growth potential will soon be unleashed. According to the 2023 annual report, we adjusted the 2024-2025 profit forecast and added the 2026 profit forecast. The company's revenue for 2024-2026 is expected to be 74.95/101.29/12.614 billion yuan (the original forecast for 2024-2025 was 70.00/8.824 billion yuan), and net profit to mother is 6.81/989/1,291 billion yuan, respectively (the original forecast for 2024-2025 was 522/624 million yuan), and EPS is 0.43/ 0.62/0.81 yuan (the original forecast for 2024-2025 was 0.33/0.40 yuan), corresponding to the closing price of 6.45 yuan on May 10, PE was 15/10/8 times, respectively. Maintain the company's “gain” rating.
Risk warning
Prices of raw materials fluctuated sharply, production capacity construction and investment fell short of expectations, international trade frictions, etc.; in June 2022, the company received a letter of regulatory disclosure from the Shanghai Stock Exchange