Key points of investment
Focus on the tire market and deepen the global layout. The company's main products are radial tires and aviation tires. Under the company's steady operation, financial performance has continued to improve in recent years. At the same time, the company is actively developing a global layout and implementing the “833Plus” strategic plan. It plans to deploy 8 digital intelligent manufacturing bases around the world in about 10 years (3 in China, 2 in Thailand, and 1 each in Europe, Africa, and North America), and also operate 3 R&D centers (China, Europe, North America) and 3 user experience centers, and take the opportunity to merge and acquire an internationally renowned tire company.
The advantages of cost-effective domestic tires are remarkable, and the global share is expected to increase rapidly. Benefiting from cost performance advantages, the global share of Chinese tire companies continues to increase. According to Michelin Annual Report and Chayuan Ruts Network, from 2000 to 2021, the global market share of leading tire manufacturers decreased at a rate of about 1 pct per year, while the global market share of third-tier and fourth-tier tire manufacturers (including Chinese tire manufacturers) increased by about 0.8 pct every year. According to an international tire perspective, most overseas market shares of Chinese brands increased year-on-year in 2023. Among them, there was significant growth in South America and Central and Eastern Europe, with increases of 5.2 pct and 5.3 pct, respectively.
The company accelerated the expansion of overseas markets and expanded production capacity in Morocco and Spain. The company currently has two major production bases, the Qingdao plant and the Thai factory. It is actively promoting the construction of the African intelligent manufacturing base “Morikirin (Morocco) project with an annual output of 12 million high-performance cars and light truck radial tires (Phase I+II)” and the European intelligent manufacturing base “Spanish project with an annual output of 12 million high-performance cars and light truck radial tires”. The global production capacity is expected to be further enhanced.
The anti-dumping duty rate at Thai factories has declined, and the company's overseas profitability is expected to further increase. The US Department of Commerce finalized the first annual administrative review of the anti-dumping investigation against Thai passenger car and light truck tires. Mori Kirin's final ruling in the Thai review was 1.24%. Compared with the 17.06% tax rate in the original review, the company's overseas profitability is expected to further increase.
Profit forecast and investment advice: We expect the company's revenue for 2024-2026 to be 98.01 billion yuan, 117.60 billion yuan, and 13.523 billion yuan, respectively, and net profit to mother of 21.51, 25.94, and 3,015 billion yuan, respectively. The corresponding PE is 11.51, 9.55, and 8.21 times, respectively. Considering that the company is deeply involved in the middle and high-end tire market, has plenty of orders in hand, and is actively expanding production capacity overseas, it was covered for the first time, and was given a “buy” rating.
Risk warning: risk of raw material price fluctuations, risk of production capacity construction progress falling short of expectations, risk of tariff changes.