The company is one of the leading enterprises in the domestic tire industry. Future performance growth is expected. The company is one of the leading enterprises in the Chinese tire industry. In recent years, it has actively carried out a global layout and successfully built three major production bases in China, Thailand and Cambodia. In the future, the company's performance is expected to grow rapidly as various new projects are put into operation one after another and gross margin increases due to the increase in the share of overseas business. We expect the company's 2024-2026 net profit to be 0.612, 0.933, and 1.248 billion yuan, respectively, and EPS 0.38, 0.59, and 0.79 yuan, respectively. The current stock price corresponds to PE of 11.5, 7.6, and 5.7 times, respectively, covered for the first time, giving it a “buy” rating.
Automobile demand is picking up, and the share of Chinese tires in the global market has steadily increased globally: since 2021, global tire demand has gradually recovered. The number of cars owned worldwide in 2021 was 1.531 billion, which is at a historically high level, and there is a big difference in the number of cars per capita among countries. We believe that the automobile market in developed countries such as Europe and America may remain stable in the future. Asia, Africa and other regions, led by China, have great potential to increase vehicle ownership per capita, which is expected to bring room for continuous growth in global tire market demand.
Domestic: Automobile sales will pick up in 2023, and the future consumer goods trade-in policy is expected to drive the growth in China's automobile demand and increase the penetration rate of new energy vehicles, and may further expand the demand in China's tire market. At the same time, the pace of construction of overseas factories by various tire companies in China has accelerated markedly in recent years. We believe that the logic of increasing the global market share of Chinese tires is being implemented steadily. At the same time, it will continue to gain prominence in the supporting market along with China's new energy vehicles going overseas. Against the backdrop of continued clearance of backward domestic production capacity, it is expected to accelerate the upgrading and restructuring of production capacity within the tire industry, and leading tire companies are expected to usher in opportunities.
Seize the “domestic and international double cycle” development opportunities, build industry-leading companies and formulate “5X strategic plans”, and strive to achieve 5 major domestic and international production bases, 5 major R&D centers, 500 strategic channel providers, 5,000 core stores, and a production capacity of 50 million or more by 2030.
Currently, the company's Thai factory has strong production and sales; the production capacity of the first phase of the Cambodia project has reached full production capacity, and strategic cooperation has been signed with several major customers in North America. In the future, as production capacity of the company's Thailand Phase II project and Cambodia Phase II project is being released one after another, the company's base industry is gathering momentum, and the global layout is expected to continue to accelerate. Furthermore, the company further promoted “intelligent transformation and digital transformation”, pioneered the operation of black light workshops, and greatly improved production efficiency.
Risk warning: Downstream demand falls short of expectations, raw material prices fluctuate greatly, industry competition intensifies, etc.