Incidents:

On August 27, 2024, GM released its 2024 semi-annual report: H1 achieved operating income of 3.068 billion yuan in 2024, up 36.91% year on year; realized net profit of 0.287 billion yuan, up 393.32% year on year; realized net profit without return to mother 0.276 billion yuan, up 514.84% year on year; gross sales margin 17.69%, up 5.07pct year on year, net sales margin 9.35%, up 6.76 pcts year on year ; Net cash flow from operating activities was 0.365 billion yuan, a year-on-year decrease of 0.034 billion yuan.

In the 2024Q2 quarter, the company achieved operating income of 1.625 billion yuan, +36.32% year over month; realized net profit of 0.134 billion yuan, +184.94% year on year, -12.48% month on month; net profit after deducting non-return to mother 0.127 billion yuan, +188.87% year on year, -15.14% month on month; net cash flow from operating activities was 0.102 billion yuan, year on year -0.322 billion yuan, month-on-month 0.16 billion yuan. Gross sales margin was 17.37%, +2.88pct year on year, -0.68pct month on month; net sales margin was 8.26%, +4.33ct year on year, -2.33pct month-on-month.

Investment highlights:

Tire boom continues, production and sales increase month-on-month

In terms of tire production and sales, in Q2 2024, the company achieved a tire production volume of 4.6843 million bars, a year-on-year tire production volume of 57.95%, +12.50% month-on-month; achieved a tire sales volume of 4.3322 million bars, +50.86% year-on-year and +15.59% month-on-month. In the first half of 2024, the company relied on the “overseas double base” layout advantages of Thailand and Cambodia to continue to promote the global marketing network layout and new business development. The new project progressed smoothly, and the competitive advantage of green and cost-effective products continued to improve, and tire production and sales increased by more than 50% year on year. At the same time, the company actively responded to external challenges such as rising raw material costs, shipping costs, and exchange rate fluctuations, to improve quality and efficiency, and achieve a significant increase in profitability.

Net profit declined slightly month-on-month in the second quarter, and gross profit increased month-on-month. In 2024Q2, the company achieved net profit of 0.134 billion yuan, a decrease of 0.019 billion yuan. 2024Q2 achieved gross profit of 0.282 billion yuan, an increase of 0.022 billion yuan over the previous month. In terms of expenses, 2024Q2 sales expenses were 0.037 billion yuan, an increase of 0.004 billion yuan over the previous month; management expenses were 0.046 billion yuan, a decrease of 0.0015 million yuan; R&D expenses were 0.024 billion yuan, an increase of 0.011 billion yuan over the previous month; financial expenses were 0.01 billion yuan. billion yuan, up 0.012 billion yuan month-on-month.

The second phase of production in Cambodia was put into operation, further internationalization

With in-depth strategic cooperation with leading global customers, in order to fully meet the needs of overseas markets, the company's Thailand Phase II project, Cambodia Phase II project, domestic semi-steel tire technical improvement project, and OTR technical improvement project have been launched one after another. As new projects continue to be implemented, it will further enhance the company's international competitiveness. On August 28, according to China Rubber Magazine, Jiangsu General Technology Co., Ltd. successfully launched the second phase of the Cambodia base project. At present, the first phase of the Cambodia project was fully completed in May this year, becoming a new profit growth point. The second phase of the Cambodia project was founded in January of this year. The production capacity includes an annual output of 3.5 million semi-steel tires and 750,000 all-steel tires. According to the company, the second phase of the project is expected to bring the company an operating income of 1.701 billion yuan and an average annual net profit of 0.231 billion yuan after delivery.

Profit forecast and investment rating The company's 2024-2026 revenue is expected to be 6.73, 9.568, and 11.104 billion yuan, and net profit to mother will be 0.627, 0.937, and 1.18 billion yuan, respectively, corresponding to PE 11, 7, and 6 times, respectively. Considering the company's future growth, the company maintains a “buy” rating.

Risks suggest that the progress of new production capacity construction falls short of expectations, the contribution performance of new production capacity falls short of expectations, fluctuations in raw material prices, changes in environmental protection policies, and a sharp decline in the economy.