Tire frame material faucet. The company was founded in 2003 and listed on A-shares in 2017. It is headquartered in Zhucheng, Weifang City, Shandong Province. It specializes in tire wire, steel cord and hose steel wire. Its products are mainly used in various tire products such as passenger car tires, truck tires, engineering tires, and aviation tires.
The company is the world's largest manufacturer of bezel steel wire, accounting for about 26%/40% of the global/domestic market; the share of the steel cord market is also increasing year by year. In 2023, the company's bead wire/steel cord/hose steel wire and other products contributed 42%/51%/7% to revenue and 49%/43%/8% of gross profit.
Profitability will resume in 2023. The company recorded its first loss in ten years in 2022 due to factors such as the downturn in the industry and fluctuations in raw material prices; in 2023, it achieved revenue of 5.56 billion yuan +7% year-on-year, and net profit of 100 million yuan to mother reversed the year-on-year loss; 2024Q1 achieved revenue of 1.24 billion yuan and net profit of 0.1 billion yuan.
Daye+Shengtong dual brand development. In 2021, the company acquired Shengtong Steel Cords to accelerate the pace of capacity expansion. In 2023, sales of all types of steel wire reached 830,000 tons +19% year-on-year, and production of all types of steel wire produced 840,000 tons +20% year-on-year. In 2023, Shengtong Steel Cords achieved net profit of 90 million yuan.
Production capacity is expanding steadily. In 2023, the company added 2 new bezel steel wire production lines in the Zhucheng factory, increasing production capacity by 50,000 tons; the first steel cord plant in the Kenli factory was successfully relocated and put into use, and construction of the second phase has also started. It is expected to be completed and put into use in October 2024.
Develop overseas business and actively prepare to build overseas factories. The company's overseas business contributed 24% of revenue and 58% of gross profit in 2023; overseas/domestic sales gross margin was 19.6%/4.7%, respectively.
The company is currently actively preparing for overseas factory construction in line with the global layout and development pace of international tire giants, and has basically completed preparations such as preliminary due diligence, planning and site selection.
Self-supplied electricity+steam to create the ultimate cost. The company built its own two 15 tons/hour biomass steam boilers in 2023; by the end of 2023, the company had 7 photovoltaic power plants with a total installed capacity of 71 MW to generate 850 million kwh per year, and the planned installed capacity of 16 MW is expected to generate 180 million kwh per year; in March 2024, the company's 4 decentralized wind power projects were approved, totaling 200MW, with an estimated annual power generation capacity of 500 million+kwh.
Covered for the first time, a “gain” rating was given. Revenue from 2024 to 2026 is estimated to be 60/65/7.2 billion yuan, +7%/10%/11% YoY, net profit to mother 1.5/2.0/ 250 million yuan, +59%/33%/24% YoY, corresponding PE 17/12/10 times.
Risk warning: Overseas business development falls short of expectations, market competition risks, performance falls short of expectations