Key points of investment

The company released its 2024 mid-year report, achieving revenue of 3.068 billion yuan, up 36.91% year on year; net profit to mother 0.287 billion yuan, up 393.32% year on year; net profit after deducting non-return to mother 0.276 billion yuan, up 514.84% year on year. Among them, 24Q2's revenue in a single quarter was 1.625 billion yuan, up 36.32% year on year and 12.56% month on month; net profit to mother was 0.134 billion yuan, up 184.94% year on year, down 12.48% month on month; net profit without return to mother was 0.127 billion yuan, up 188.87% year on year, down 15.14% month on month. The results were in line with previous forecasts.

The tire industry continues to be booming. According to customs data 24H1, the tire industry continues to be booming. According to customs data 24H1, China's cumulative export volume of rubber tires was 4.51 million tons, up 5.3% year on year. During the same period, the company's sales volume was 8.08 million bars, up 50.7% year on year, mainly due to new production capacity at the Cambodian base. Looking at a single quarter, 24Q2 tires sold 4.33 million bars, up 50.9% year on year and 15.6% month on month; the average price of Q2 tires was 366.3 yuan/bar, down 10.1% year on year and 2.6% month on month, which is expected to be due to differences in product structure. In terms of raw materials, 24Q2's procurement prices for natural rubber, synthetic rubber, carbon black, and steel cords increased by 7.54%, 7.06%, 0.08%, and 2.38%, respectively. 24Q2's gross sales margin was 17.37%, up 2.88 pct year on year and 0.68 pct month on month; net sales margin was 8.26%, up 4.33 pct year on year, down 2.33 pct month on month, and net interest rate decreased even more, mainly due to 24Q2 credit and asset impairment increased by about 30 million month-on-month. The 24H1 company's inventory turnover ratio was 1.41 and the accounts receivable turnover ratio was 2.56, both of which increased year-on-year.

Overseas dual bases work hard to accelerate the company's growth

Due to strong demand and the release of new production capacity, the net profit of 24H1's overseas bases increased sharply year on year. Net profit of Thailand and Cambodia was 0.399 billion yuan (up 0.203 billion yuan year on year) and 0.091 billion yuan (up 0.091 billion yuan year on year), respectively.

24H1's construction project was 1.538 billion yuan, an increase of 55% over the previous year. The company is currently constructing Thailand Phase II and Cambodia Phase II overseas, and domestic semi-steel tire technical improvement projects and OTR technical improvement projects have also started one after another. The above two overseas projects are expected to increase the company's production capacity by 13.5 million bars of semi-steel and 750,000 bars of all-steel production capacity. The company's overseas bases will be rich in additional production capacity in the future, and domestic technical reforms are expected to optimize the product structure and improve profitability. With joint efforts at home and abroad, we believe that the company is expected to usher in a period of rapid growth in performance.

Profit forecasting and valuation

The tire industry is booming, and the company's overseas production capacity continues to expand. The company's net profit for 24-26 is 0.652 billion yuan, 0.914 billion yuan, 1.101 billion yuan, EPS is 0.41, 0.58, 0.69 yuan/share, and the current price of PE is 10.39, 7.41, and 6.15 times, maintaining a “buy” rating.

Risk warning

The release of new production capacity fell short of expectations; sea freight and raw material prices fluctuated greatly; international trade frictions; exchange rate fluctuations