Incidents:

On June 14, 2024, the company issued an announcement stating that the company plans to adjust the product structure on the basis of Thailand's high-performance radial tire expansion project. The second phase of the project will have an annual production capacity of 10 million semi-steel radial tires. After the construction of this project is completed, the company's Thai base will have an annual production capacity of 16 million semi-steel radial tires and 1.3 million all-steel radial tires.

Investment highlights:

Continue to advance the “5X Strategic Plan”. Thailand's second-phase semi-steel production capacity will increase. On August 28, 2023, the company announced Thailand's high-performance radial tire expansion project, investing 1,884 billion yuan to build 500,000 all-steel radial tires and 6 million semi-steel radial tires; on June 14, 2024, the company announced an adjusted production expansion plan and plans to adjust the product structure on the basis of Thailand's high-performance radial tire expansion project. The second phase of the project will have an annual production capacity of 10 million semi-steel radial tires. The total investment of the project is expected to be 1,976 million yuan after production The average annual revenue is 2,466 billion yuan, and the total estimated annual profit is 500 million yuan.

The company's overseas production capacity is rapidly deployed, and it is optimistic that production capacity investment will bring growth. The company responded positively to the national “Belt and Road” initiative and invested in the construction of the company's first overseas production base in Thailand in 2019. At present, the first phase of the company's Thai plant project has been fully put into operation, with an annual production capacity of 1.3 million all-steel tires and 6 million semi-steel tires. At the same time, the Cambodian plant, the second overseas production base, was officially put into operation in May 2023. By the end of 2023, the company's projects under construction include Cambodia Phase II, Thailand Phase II, and semi-steel tires and off-road tires at the Wuxi plant. It is expected that revenue and profit will increase further after production capacity is put into operation. As of June 2024, the company had a production capacity of 4.6 million all-steel tires and 14 million semi-steel tires, and a production capacity of 750,000 all-steel tires, 22.5 million semi-steel tires, and 100,000 off-road tires under construction.

Overseas market profits are high, and overseas production capacity investment is expected to improve gross margin in 2023. The company's overseas market revenue was 3.672 billion yuan, corresponding business revenue accounting for 72.51%, and overseas market gross margin was 22.16%; revenue from the mainland China market was 1,356 billion yuan, accounting for 26.78% of the corresponding business, and -2.02% gross margin. The promotion of overseas factories is conducive to increasing the share of overseas revenue, and the overall gross margin is expected to improve.

Profit forecasts and investment ratings estimate that the company's 2024-2026 revenue will be 6.830 billion yuan, 9.636 billion yuan, and 11.309 billion yuan, with net profit attributable to mother of 7.00, 10.34, and 1,346 billion yuan respectively. The corresponding PE is 13, 9, and 7 times, respectively, maintaining a “buy” rating.

Risks indicate that the company's new production capacity falls short of expectations; risk of rising raw material prices; sharp rise in shipping prices; environmental protection and production safety risks; competition in the same industry increases the risk.