Zhongtong Finance App learned that Southwest Securities released a research report stating that it maintains a "buy" rating for Prinx Chengshan (01809) and expects the compound annual growth rate of net profit attributable to mother to be 16.3% from 2024 to 2026. Considering the company's continuous strengthening of global layout, optimizing distribution channels, enriching new product styles, and Thailand's tax rate reduction, the future performance has upward elasticity. The company is given a target price of 13.54 HKD for PE of 6 times in 2024. On July 19, the company released a performance forecast for the first half of 2024, expecting a net income of 0.752-0.85 billion yuan, an increase of approximately 130%-160% YoY, and an increase of approximately 7%-20% compared to the second half of 2023.

The main viewpoints of Southwest Securities are as follows:

In 2024 H1, the demand for semi-steel tires and exports continued to be strong, and the company's product sales volume increased significantly.

According to the statistics of the National Bureau of Statistics and the General Administration of Customs, the cumulative output of domestic rubber tire outer tires in H1 2024 was 0.53 billion, a YoY increase of 10.6%, and the cumulative exports were 0.33 billion, a YoY increase of 10.2%. The demand for tire consumption is still strong. In terms of capacity utilization rate, as of July 18, 2024, the half-steel tire opening rate was 79.1%, maintaining a relatively high level, and the all-steel tire opening rate was 52.9%, relatively weak, showing that the demand for all-steel tires was soft. Benefiting from the sustained strong global demand for semi-steel tires, the company achieved tire sales of 13.8 million in H1 2024, an increase of 19% YoY and approximately 2% compared to the second half of 2023. Among them, overseas market sales increased by approximately 21% YoY, and passenger vehicle tire sales increased by approximately 25% YoY.

In the first half of the year, the profit-making ability was less affected by the cost side, and attention should be paid to the trend of raw material prices and shipping costs in the later period.

In terms of raw material prices for tires, according to the bank's statistics, the average price index of raw materials for tires in Q1/Q2 2024 was 115.8/123.3, an increase of 0.4%/6.5% MoM, respectively. Several companies raised product prices at the end of the first quarter and beginning of the second quarter, transmitting cost pressures, and the profitability in the first half of the year was less affected by cost. As of July 19, 2024, the raw material price index was 127.2, an increase of 3.1% compared to the average value in Q2 2024. It is recommended to continue to pay attention to the future trend of raw material prices. At present, tire demand is strong, and profitability may be limited by the rise in raw material prices. It is recommended to pay attention to the trend of raw material prices in the future.

The company will add 2.33 million semi-steel tire production capacity per year in 2024.

At present, the company's Thailand/Shandong tire production base has a capacity of 2/7.4 million all-steel tires and 800/11.2 million semi-steel tires per year. In 2023, the utilization rate of all-steel tire production capacity in the Thailand/Shandong tire production base was 81.0%/90.0%, and the utilization rate of the semi-steel tire production capacity was 90.1%/96.8%. On August 31, 2023, the Shandong company's capacity optimization proposal was passed, and after the capacity optimization is completed, the semi-steel tire production capacity will increase to 11.53 million tires per year (+0.33 million tires per year), and the Thailand tire production base three-phase project was approved, with a capacity increase of 2 million semi-steel tires per year after completion. It is expected to reach production in the second half of 2024. After the project reaches production, it will contribute to the company's performance in 2024.

With the tax rate reduction in Thailand, the company has upward potential in future performance.

In January 2024, the tax rate for passenger car and light truck tires exported from the company's Thailand base to the United States was lowered from 17.06% to 4.52%. In 2023, the company's international distribution channels for products achieved sales of 17.36 million tires, a YoY increase of 32.8%, with revenue of 6.326 billion yuan, a YoY increase of 11.9%, of which the revenue from the Thailand/Shandong tire production base accounted for 49.1%/50.9%. The tax refund of approximately 20.8 million US dollars expected to be returned from the US Customs and Border Protection for overpaid anti-dumping taxes was disclosed in the company's 2023 annual report. According to the company's 2024 interim performance forecast, the tax payment has been refunded.