Description of the event
1. The company released its 2023 annual report and achieved annual revenue of 5.06 billion yuan (+22.9% YoY), net profit of 220 million yuan (+1175.5% YoY), and non-net profit of 200 million yuan (+2733.6% YoY). The company plans to distribute a cash dividend of 0.56 yuan (tax included) for every 10 shares to all shareholders. 2. The company released its 2024 quarterly report, achieving revenue of 1.44 billion yuan (+37.6% YoY), net profit of 150 million yuan (YoY +1270.6%), and non-net profit of 150 million yuan (+14373.7% YoY).
Incident comments
The boom in 2023 was positive, with a significant increase in revenue and profit. In 2023, the production and sales volume of the company's tire products was 11.976 million units/11.861 million pieces, and both revenue and performance increased markedly, with an overall gross margin of 15.7% (+5.2 pct year over year), of which Q4 gross margin was 20.6% in a single quarter (+9.7 pct year over year, +4.7 pct month over month). The increase over the same period has a large relationship with the increase in production capacity investment at overseas bases, the improvement in overseas demand and the decline in raw material prices. The main reasons for the increase in the company's performance in 2023 are: 1) On the raw material side: in 2023, the company's main raw materials were natural rubber (-12.6% YoY), synthetic rubber (-15.7% YoY), steel cord (-9.9% YoY), carbon black (YoY -10.4%), the cost pressure decreased compared to 2022; 2) Export side: Despite weak global economic recovery and increased geopolitical risks in 2023, China Tire achieved contrarian growth in exports due to high cost performance, and the penetration rate continued to increase; 3) Strong overseas bases: the company's factory in Thailand in 2023 Production and sales are strong, and orders continue to be in short supply; since the opening of the Cambodian factory in May 2023, production capacity has continued to accelerate, and it is expected that full production will be achieved in 2024. Under multiple benefits, the company's performance increased significantly in 2023.
Q1 Sales increased month-on-month, and the price of a single tire decreased. Q1 The company produced 4.164 million tires, +23.6% month-on-month; total sales volume was 37.48 million, +27.5% month-on-month. According to the company's operating data, Q1's revenue from a single child was 375.9 yuan, a decrease of 84.8 yuan over the previous month. The decline in single tire prices is mainly due to the company's continued investment in semi-steel production capacity, and the average unit price drop. Q4 The company's gross profit margin in a single quarter was 18.1% (+7.6 pct year on year, -2.5 pct month over month). The year-on-year increase was mainly due to the increase in sales share of high-margin semi-steel products. Profitability is expected to continue to increase as production capacity is released at the company's sites in Thailand and Cambodia.
Laying out a global strategy, the company was limited by “double reverse” influence. Benefiting from overseas dual bases and a product structure dominated by semi-steel, the company is limited by the “double reverse” influence. The company's Cambodia base is currently unaffected by the “double reverse” policy of Europe and America. The double anti-tax on semi-steel tires at the Thai base was adjusted from 17.06% to 4.52%. The lower tax rate is expected to strengthen the company's competitiveness in the international market.
The product structure is continuously optimized, and overseas double bases are laid out. In terms of intelligent manufacturing, the company accelerates intelligent manufacturing and digital transformation, and is a model enterprise that complies with the standards of the integrated management system of two modernizations in Jiangsu Province in 2022. In terms of product strength, the company's engineering tires, semi-steel tires, and all-steel tires are committed to product development and user orientation. They have certain advantages in market segments, and have won various awards at home and abroad.
In terms of product structure, the company continues to increase the sales share of semi-steel tires with stronger consumer properties, and profitability continues to increase. As of 2023H1, the company's share of semi-steel tire product revenue has risen to 41.9%. In terms of overseas layout, with the implementation of the company's production capacity in Thailand in 2020 and the gradual release of production capacity in Thailand and Cambodia projects in 2020-2023, the company's share of overseas revenue increased from 25.8% in 2020 to 72.5% in 2023, and the share of overseas gross profit increased from 35.9% in 2020 to 102.1% in 2023. The internationalization strategy brought about a huge increase in the company's profitability.
Maintain a “buy” rating. The company is a tire company that started with oblique interlacing, continuously expanded its categories horizontally, and gradually developed into a full range of products. The company has leading R&D capabilities, and its products have hard power. Overseas bases in Thailand and Cambodia are gradually gaining strength, and there is plenty of momentum for growth. The company's net profit for 2024-2026 is estimated to be RMB 7.2, 1.15 billion and RMB 1.46 billion, respectively.
Risk warning
1. The construction progress of the project falls short of expectations;
2. Trade frictions have intensified and raw material prices have fluctuated.