According to the Wisdom Financial APP, West Securities released a research report stating that the downstream auto industry sales rebounded, driving tire demand; upstream raw material prices fluctuated and rose, with marine freight rates at a high level, putting pressure on tire business costs; the operating rate of semi-steel tires is high, while the operating rate of all-steel tires has declined. From the analysis of industry drivers, there is currently a trend of stricter environmental protection, leading to the elimination of low-end tires in China. According to incomplete statistics from the China Tire Business Network, as of January 24, 24, Shandong Tire has eliminated at least 44.32 million units of capacity in the past four years. Chinese tire companies rely on overseas bases to increase penetration in Europe and the United States. By the end of 23, Chinese tire companies had produced over 0.1 billion units of semi-steel tires overseas, with all-steel tires reaching 25.9 million units. The planned but not yet produced capacity is 97 million units for semi-steel tires and 3.15 million units for all-steel.

The decline in stock price is due to the impact of rising raw material prices and marine freight costs. Mainly because the raw material costs in China's tire industry account for a high proportion, and despite the majority of tire companies adopting the FOB model, they still bear a certain cost when marine freight rates are high. Secondly, it is affected by overseas trade barriers, such as the double reverse investigation launched by the United States against Southeast Asia in 2020, affecting valuation.

The rise in stock price is due to the impact of factors such as the decrease in raw material prices and cost, leading to increased profitability. Secondly, it is affected by the release of overseas base capacity, which can effectively avoid double reverse and drive revenue and profit. Thirdly, it is due to entering the supporting business of new energy vehicles, opening up growth space and increasing valuation.

Tire companies are expanding their overseas bases and paying attention to brand strategy. After more than 30 years of development, the overall scale of China's tire industry has grown significantly, and the quantity has accounted for half of the top 75 companies globally, but it still presents a situation of being big but not strong, and still mainly relies on the advantage of cost performance. In order to enhance their own competitiveness and to a certain extent, avoid trade risks, tire companies continue to lay out overseas bases, with Sailun, Linglong, Sentury, and Jiangsu General Technology all deploying multiple overseas bases. At the same time, tire companies actively enhance brand value by expanding supporting businesses, developing innovative products, and exploring new channels of promotion, from sponsoring sports events to cooperating with media and platforms, making great efforts in marketing.

Investment advice: From the perspective of product structure, there is a good demand for semi-steel tires, and the future development space of Chinese tire companies is still large. It is recommended to focus on enterprises with a high proportion of semi-steel tires. From the perspective of avoiding trade barriers, it is recommended to focus on enterprises with dual overseas bases. From the perspective of long-term development, it is recommended to focus on enterprises with a variety of supporting vehicle models and a multi-channel approach to building brand value. Taking the above perspectives into consideration, it is recommended to pay attention to Sailun Tire (601058.SH), Sentury Tire (002984.SZ), Linglong Tire (601966.SH), and focus on Jiangsu General Technology (601500.SH).

Risk warning: The magnitude of the increase in raw material prices and marine freight costs may exceed expectations, exchange rate risks, trade risks, demand may be lower than expected, and product prices may decline.