Lead intelligent tire manufacturing and accelerate the global strategic layout. The company has been deeply involved in the tire industry for more than 20 years and has built modern production bases in China, Thailand and Cambodia. With the gradual implementation of overseas dual bases, the overseas market sales contribution increased from about 14% in 2019 to 73% in 2023.

In 2023, the company's Qianlima brand was selected as one of the top ten influential tire brands in China. At the same time, with the accelerated implementation of new projects, the company entered a performance realization period. Among them, net profit to mother was 0.153 billion yuan in 24Q1, an increase of about 1271% over the previous year.

The supply and demand pattern continues to improve, and the tire industry is booming. Benefiting from the increase in global automobile sales and rigid consumption brought about by travel, etc., global tire sales continued to grow in 2023. At the same time, the number of cars per capita in emerging markets is low. The number of cars owned by 1,000 people in China in 2022 is about 1/3 of developed countries such as Germany. Emerging markets, mainly in China, have a lot of room to grow in the future, providing long-term support for tire demand. On the supply side, as policies are strengthened, backward domestic production capacity is expected to be cleared at an accelerated pace, while leading companies are speeding up the pace of overseas expansion. The number of Chinese companies entering the top 75 global tire companies increased from 11 in 2006 to 36 in 2022, and the corresponding market share increased from 5% to 14.8%. As domestic tire replacement accelerates, there is plenty of room for future market share growth.

Overseas dual bases help growth, and a diversified layout can be expected in the future. The company attaches importance to R&D, continues to promote the internationalization, intelligence and green upgrading of the industry, and build a 5G carbon cloud smart factory to help reduce costs and increase efficiency. At the same time, the company has formulated a “5X strategic plan” to achieve 5 major domestic and foreign production bases and a production capacity of 50 million or more within the next 10 years. By the end of 2023, the company had a production capacity of 16.2 million strips, while the planned design production capacity of the planned projects reached 38.45 million pieces, so there is plenty of room to increase production capacity. In addition, the company continues to optimize its product structure, and the revenue contribution of the company's semi-steel tire products increased sharply from about 4% in 2019 to 35% in 2022. With the accelerated implementation of new products such as off-road tires, the company's profitability is expected to continue to increase.

Profit forecasting and investment advice

We believe that the company is speeding up the deployment of overseas double bases, and there is plenty of room to increase production capacity. At the same time, the company continues to optimize its product structure and accelerate the launch of more profitable products such as off-road tires and semi-steel tires, and future growth can be expected. We expect the company's net profit to be 0.645, 0.969, and 1.223 billion yuan respectively in 2024-2026, and the corresponding PE will be 13 times, 9 times, and 7 times (corresponding to the closing price on October 10), respectively, covering the “buy” rating for the first time.

Risk warning

Risk of fluctuations in raw material prices, risk of exchange rate changes, risk of increased trade barriers, etc.