The low-end market is becoming increasingly saturated, and domestic tires are an inevitable trend. High-end tires are testing the company's excellent product strength, broad channels, and high popularity. Higher barriers will also bring richer rewards.
The Zhitong Finance App learned that Guohai Securities released a research report stating that high-end technology is a key factor in the next wave of tire opportunities. The low-end market is becoming increasingly saturated, and domestic tires are an inevitable trend. High-end tires are testing the company's excellent product strength, broad channels, and high popularity. Higher barriers will also bring richer rewards. Domestic tire companies are likely to split for the first time through the establishment of overseas bases. There are two obvious tracking points for high-end tire companies: a contrarian rise in comparable gross margin and a breakthrough in high-end automobile support. The winners of high-end technology will receive more attention in the capital market, which in turn will lead to an upward rise in price-earnings ratios.
Overseas base: broad international space, high-end opening
Guohai Securities predicts that by the end of 2025, the production capacity of semi-steel tires at overseas bases of Chinese tire companies will reach 0.177 billion. The target markets are the US, Europe and Southeast Asia. Assuming a 90% operating rate and 70% export to the US, the export volume is about 0.112 billion. Compared with the US 0.305 billion market in 2023, there is still a lot of room for growth. By the end of 2025, the production capacity of all-steel tires at overseas bases of Chinese tire companies will reach 35.52 million. The target markets are the US, Europe and Southeast Asia. Assuming a 90% operating rate and 70% export to the US, the export volume is about 22.38 million bars. Compared with the US market of 27 million tires in 2023, there is still some market space.
The highlight of the next wave of domestic tires is high-end. The low-end market is becoming increasingly saturated. Domestic tires are an inevitable trend. High-end tires are an inevitable trend. High-end tires test the company's outstanding product strength, broad channels, and high popularity. Higher barriers will also bring more generous rewards. Domestic tire companies are likely to split for the first time through the establishment of overseas bases. There are two obvious tracking points for high-end tire companies: a contrarian rise in comparable gross margin and a breakthrough in high-end automobile support. The winners of high-end technology will receive more attention in the capital market, which in turn will lead to an upward rise in price-earnings ratios.
China base: The global automotive industry is recovering, and exports from Chinese bases are expected to increase
The export destinations of China's tire base are Europe, Southeast Asia, Africa and other regions. Guohai Securities anticipates that by 2025, domestic tire bases will increase production capacity by 38.33 million strips of semi-steel tires and 7.15 million new production capacity of all-steel tires. Compared with the sum of local production in Europe and imports from developed regions in Europe, there is a lot of room for growth. The automobile market in the European market is growing rapidly, and the number of new passenger car and commercial vehicle registrations in the EU increased year-on-year in 2024Q1. According to the official website of the European Automobile Manufacturers Association, from January to April 2024, the number of new passenger car registrations in the EU was 3.6912 million, +6.58%; 2024Q1, the number of registered commercial vehicles in the EU was 0.4949 million vehicles, +10.14% over the same period last year. From January to May 2024, China's cumulative export volume of semi-steel tires was about 0.138 billion bars, +14.59%; the cumulative export volume of all-steel tires was about 0.05 billion bars, +2.51% year over year.
Domestic all-steel: terminal demand in the commercial vehicle market is picking up, and demand for all-steel tires is expected to increase
Demand for terminals in the domestic commercial vehicle market will pick up in 2024. From January to May 2024, commercial vehicle production and sales reached 1.675 million units and 1.731 million units, respectively, up 3.1% and 7.1% year-on-year, respectively. In May 2024, the real estate policy made great efforts to continue to promote the guarantee of housing and the digestion of existing commercial housing. The resumption of work and new construction on the real estate side is driving demand for trucks, and consumer demand for all-steel tires is expected to increase. Guohai Securities expects China's all-steel tire consumption in 2024-2026 to be 78.97, 81.4, and 83.75 million, respectively, with year-on-year increases of 4.62%, 3.07%, and 2.88%, respectively.
Domestic semi-steel: passenger car production and sales remain high, driving demand for semi-steel tires to increase
The domestic passenger car market will maintain high growth in 2024. From January to May 2024, China's passenger car production and sales reached 9.709 million units and 9.765 million units respectively, up 7.1% and 8.5%, respectively. Guohai Securities estimates that in 2024-2026, China's semi-steel tire consumption will be 0.336/0.36/0.383 billion, respectively, up 7.57%/7.05%/6.51% year-on-year, respectively.
Industry rating: Considering that the tire industry is embarking on a high-end journey, there is broad scope for internationalization, and the tire industry's “recommended” rating is maintained.
Focus on: Sailun Tire, Sen Kirin, Linglong Tire, GM Co., Ltd., Guizhou Tire, Triangle Tire, Pulin Chengshan, Fengshen Co., Ltd., Qingdao Double Star, etc.
Risk warning: The global economy has declined, raw material prices have risen sharply, shipping prices have risen sharply, international trade frictions have intensified, and the focus is on the company's performance falling short of expectations.