Incident: On August 23, the company released its 2024 semi-annual report. 24H1 achieved operating income of 5.381 billion yuan, +23.74% year over year; realized net profit attributable to mother of 0.811 billion yuan (US Customs and Border Protection refunded about 0.163 billion yuan of anti-dumping duties and income tax surplus of about 0.12 billion yuan), +148.04% year over year, achieving net profit without return to mother 0.8 billion yuan, +149.37% year on year; gross margin of 24.62% The year-on-year increase was 5.64pp, the net interest rate was 15.08%, and the year-on-year increase was 7.56pp.

Demand for semi-steel tires and exports continued to be strong, and the company's sales volume and revenue both increased. According to data from the National Bureau of Statistics and the General Administration of Customs, in the first seven months of 2024, domestic rubber tire production accumulated 0.62 billion pieces, an increase of 10.1% year on year; exports totaled 0.39 billion pieces, up 9.7% year on year. Tire consumer demand is still strong. In terms of operating rate, as of August 22, 2024, the operating rate of steel tires was 79% this week, maintaining a high level. The operating rate of all-steel tires was 58%, which is relatively weak. As of the first half of 2024, the company sold about 13.8 million tires, an increase of 19.3% over the previous year. Among them, all-steel tires sold about 4.1 million, or +10.8%; half-steel tires sold about 9.4 million, +24.1% year-on-year; oblique tires sold 0.22 million, or -4.6% year-on-year. All-steel tires, semi-steel tires and oblique tires each accounted for 57.1%/41.1%/1.8% of the company's tire revenue. The revenue from the tire production sites in Shandong and Thailand accounted for about 64.9% and 35.1% of the company's tire revenue, respectively.

Profitability in the first half of the year was less affected by the cost side. Focus on trends in raw material prices and shipping costs in the later stages. In terms of the price of tire raw materials, according to our statistics, the average values of the 2024Q1/Q2 tire raw material price index were 115.8/123.3, respectively, up 0.4%/6.5% from month to month. Many companies raised product prices at the end of the first quarter and the beginning of the second quarter, which transmitted cost pressure. Profitability in the first half of the year was less affected by the cost side. As of August 23, 2024, the raw material price index was 126.7, up 2.7% from the 2024Q2 average. Currently, although tire demand is strong, profitability may be limited by rising raw material prices. It is recommended to pay attention to changes on the cost side in the later stages.

The utilization rate of semi-steel tires is close to full production, and the expansion of production at tire bases in Thailand and Shandong has been steadily implemented. In the first half of 2024, the company's Thailand/Shandong tire production base formed a production capacity of 200/ 7.4 million steel tires and 1000/ 11.53 million semi-steel tires. The capacity utilization rate for all-steel tires at the Thailand/Shandong tire production base is 89.3%/86.3%, and the capacity utilization rate for semi-steel tires is 97.6%/96.5%. The production capacity optimization and upgrading project of the semi-steel radial production line of the Shandong tire production base started by the company in the third quarter of 2023 was completed in the second quarter of 2024. The production capacity release of the Thai tire production base phase III project (2 million semi-steel radial tires per year), which was launched at the same time, is expected to reach production by the fourth quarter of 2024, which will contribute to the company's performance.

The US Department of Commerce's preliminary ruling on the second PCR anti-dumping review against Thailand came to fruition. According to the company's disclosure, the US Department of Commerce reduced tariffs on Thailand's PCR anti-dumping first administrative review (January 1, 2021 to June 30, 2022), and the US Customs and Border Protection refunded the overpaid anti-dumping duty of about $20.8 million. The US Department of Commerce issued a notice on September 11, 2023 to initiate the second PCR anti-dumping administrative review process against Thailand (July 1, 2022 to June 30, 2023). Pulin Chengshan submitted a defense as a by-election compulsory respondent. The US Department of Commerce issued a preliminary ruling for this administrative review on August 9, 2024. Pulin Thailand's anti-dumping duty rate is 4.95% (the company tariff within the review time period is 17.06%). The final ruling results are expected to be announced in early 2025. If the final ruling results are consistent, the company will still receive a response Overpayment of anti-dumping duties during the review period.

Combining green environmental protection with high performance, the company's new products lead the industry trend. In the first half of the year, the company actively promoted the development and launch of new products. A total of 300 new products were launched, including 14 all-steel radial tires and 286 semi-steel radial tires. In the field of all-steel tires, we focus on developing a new generation of green and environmentally friendly products with low rolling resistance and high wear resistance to meet the global demand for environmental protection and sustainable development. In the field of semi-steel tires, the company introduced high-performance tires and new energy tires according to market trends, further consolidating its leading position in the NEV and high-performance tire markets. In the international market, the company launched the Pulin and Naruyama series of North American 4S, European Pulin UHP and 4S Van products, European Chengshan 4S Van products, and a full range of new Chengshan winter tire products, further enriching the company's seasonal semi-steel product line.

Profit forecast and rating: The company's net profit CAGR for 24-26 is estimated to be 16.3%. Considering that the company continues to strengthen its global layout and optimize the distribution channel layout, the variety of new products, the reduction in the tax rate at the Thai base, future performance is flexible upward, and maintains a “buy” rating.

Risk warning: exchange rate risk, international trade friction risk, raw material price fluctuation risk.