The company's net profit increased significantly year-on-year for the full year of 2023 and the first quarter of 2024. 1) In 2023, the company achieved operating income of 5,064 billion yuan, a year-on-year increase of 22.92%, with an average compound growth rate of 11.01% in 2019-2023; net profit to mother was 216 million yuan, an increase of 1172.65% year-on-year, in line with the average growth rate of 20.10% in 2019-2023. 2) In the first quarter of 2024, the company achieved operating income of 1,443 billion yuan, a year-on-year increase of 37.58%; net profit to mother of 155 million yuan, an increase of 1270.57%; and diluted earnings per share of 0.10 yuan/share, an increase of 861.31% year-on-year. 3) The three rates in 2023 were 12.49%, an increase of 2.53 percentage points over the previous year. The sales expense ratio, management expense ratio, and financial expense ratio were 3.47%, 5.22%, and 3.80%, respectively, up 0.97, 0.75, and 0.81 percentage points from the previous year. The R&D expenditure rate was 3.55%, a decrease of 0.33 percentage points from the previous year.
The company's main products are all-steel radial tires, semi-steel radial tires and oblique tires. 1) Tire product revenue in 2023 was 5,028 billion yuan, up 23.83% year on year, with a gross profit margin of 15.64%, an increase of 6.05 percentage points over the previous year. 2) By region, domestic revenue was 1,356 billion yuan, down 6.31% year on year, gross profit margin -2.02%, down 9.24 percentage points from the previous year; foreign revenue was 3,672 billion yuan, up 40.53% year on year, and gross profit margin was 22.16%, up 9.39 percentage points from the previous year.
The company actively promotes production capacity construction and is optimistic about the growth brought about by the commissioning of overseas bases. By the end of 2023, the company had an all-steel radial tire production capacity of 4.2 million units/year, with a production capacity of 1.65 million units/year, including 400,000 units of the first phase of the Cambodia plant project, which the company expects to be completed in June 2024; the second phase of the Thailand plant project is expected to be put into operation in 2025; 750,000 units of the second phase of the Cambodian factory project. There are 12 million semi-steel radial tires per year, with production capacity of 20.5 million units/year, including the first phase of the Cambodia project, which the company expects to be completed in June 2024; the second phase of the Thailand factory project is 6 million, which the company expects to complete in 2025; 3.5 million units of the second phase of the Cambodian plant project, which the company expects to be completed in 2025; the technical improvement project for the Wuxi plant is 9 million.
Facing tire trade barriers, the company further accelerated its global layout. Based on the macro situation and industry trends, the company formulated the “5X Strategic Plan” to seize domestic and international dual cycle opportunities, and strive to achieve 5 major domestic and international production bases, 5 major R&D centers, 500 strategic channel providers, 5,000 core stores, and a production capacity of more than 50 million units within the next 10 years.
Profit forecasts and reference ratings. We expect the company's EPS to be 0.40, 0.57, and 0.72 yuan in 2024-2026. Referring to the valuation of comparable companies in the same industry, we believe that a reasonable valuation range is 16-18 times PE in 2024, corresponding to a reasonable value range of 6.40-7.20 yuan. The first coverage gave it an superior market rating.
Risk warning. The progress of production capacity under construction fell short of expectations; changes in raw material prices; changes in trade tariffs.