Incidents:

On August 29, 2024, Mori Kirin released the 2024 semi-annual report: in 2024, H1 achieved operating income of 4.11 billion yuan, up 16.21% year on year; realized net profit of 1.077 billion yuan, up 77.71% year on year; realized net profit without return to mother of 1.059 billion yuan, up 81.56% year on year; gross sales margin of 33.24%, up 10.84 pct year on year; net sales margin of 26.21%, up 9.07pct year on year; operation Net cash flow from activities was $0.695 billion, a year-on-year decrease of $0.03 billion.

In the 2024Q2 quarter, the company achieved operating income of 1.995 billion yuan, +6.16% year over month, -5.7% month on month; realized net profit of 0.574 billion yuan, +61.11% year on year, +13.88% month on month; net profit after deducting non-return to mother 0.562 billion yuan, +63.95% year on year, +13.23% month on month; net cash flow from operating activities was 0.296 billion yuan, -0.041 billion yuan year on month, -0.103 billion yuan month on month billion yuan. 2024Q2 gross sales margin was 35.27%, +12.82pct year on year, +3.95pct month on month; net sales margin was 28.76%, +9.81pct year on year, +4.94pct month-on-month.

On September 6, 2024, the company issued an announcement. Recently, the company received the “Notice Letter on the Expiration of the Qingdao Senkirin Tire Co., Ltd. Stock Reduction Plan Period and Implementation Status of the Shareholding Reduction Plan” issued by shareholders Senbaolin, Sen Weilin, Mori Tadayashi, and Mori Linglin. The above four shareholders' holdings reduction plans have expired.

Investment highlights:

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

In the first half of 2024, in overseas markets, Morikirin's high-quality, high-performance semi-steel tire products continued to be in short supply in the European and American tire markets, while the company continued to steadily develop domestic markets with high growth potential. In terms of tire production and sales, in Q2 2024, the company achieved a tire production volume of 8.0109 million bars, +10.95% year-on-month, and -0.80% month-on-month; achieved 7.49 million tire sales, +5.40% year-on-year and -1.54% month-on-month.

In 2024, H1 Thailand achieved operating income of 2.609 billion yuan, +42.36% year over year; net profit of 0.708 billion yuan, +109.73% year over year.

Net profit increased sequentially in the second quarter, and the ability to control expenses was enhanced

2024Q2 achieved net profit of 0.574 billion yuan, an increase of 69.89 million yuan over the previous month. 2024Q2 achieved gross profit of 0.704 billion yuan, an increase of 41.06 million yuan over the previous month. In terms of expenses, 2024Q2 sales expenses were 24.93 million yuan, a decrease of 11.28 million yuan from the previous month; management expenses were 47.81 million yuan, an increase of 5.97 million yuan; R&D expenses were 47.5 million yuan, a decrease of 3.31 million yuan from the previous month; financial expenses were -71.52 million yuan million yuan (0.11 million yuan in the same period last year). The fair value change loss of 2024Q2 was 2.46 million yuan, an increase of 1.72 million yuan over the previous month.

The level of intelligent manufacturing is leading in the industry. The Moroccan factory is progressing steadily. Currently, the company's Morocco factory is progressing steadily according to the plan, making every effort to start production and operation in the fourth quarter of 2024. Stronger comprehensive advantages make the demand for orders from the Moroccan factory stronger. Subsequently, along with the increase in production capacity of the Moroccan factory, the needs of the company's high-quality customers can be better satisfied.

The company's intelligent manufacturing level is in a leading exemplary position in the industry. The company was selected as “2016 Intelligent Manufacturing Comprehensive Standardization and New Model Application”, “2017 Intelligent Manufacturing Pilot Demonstration Project”, and “2018 Pilot Demonstration Project for Integrated Manufacturing and Internet Development”. In 2022, the company also received the honor of “2022 Intelligent Manufacturing Demonstration Factory” by the Ministry of Industry and Information Technology, becoming the only Chinese tire company to receive national intelligent manufacturing awards four times.

Profit forecasts and investment ratings

The company's revenue for 2024-2026 is estimated to be 9.071, 11.501, and 13.003 billion yuan, respectively, and net profit to mother is 2.258, 2.662, and 2.999 billion yuan, respectively, corresponding to PE 11, 9, and 8 times, respectively. Considering the company's future growth, it maintains a “buy” rating.

Risk warning

Demand for terminals weakened, new production capacity contributed less than expected, raw material prices fluctuated, environmental protection policies changed, and the economy declined sharply.