occurrences

On October 18, 2024, the company released its three-quarter report. In the first three quarters of 2024, it achieved total operating income of 6.34 billion yuan, up 10.4% year on year; net profit to mother was 1.73 billion yuan, up 73.7% year on year; of these, total operating income was 2.23 billion yuan in a single quarter, up 1.1% year on year, up 11.8% year on month, and net profit due to mother was 0.648 billion yuan, up 67.5% year on year and 13% month on month.

Management analysis

The company's tire production and sales volume continues to improve, and profitability continues to improve. The company's tire production in the first three quarters was 24.24 million bars, up 14% year on year; of these, half steel tire production was 23.56 million bars, up 14% year on year; all-steel tire production was 0.685 million, up 26% year on year; tire sales were 23.36 million bars, up 8% year on year; half steel tire sales were 22.68 million bars, up 7% year on year; and all-steel tire sales were 0.68 million bars, up 30% year on year. In the third quarter, tire production was 8.16 million bars, up 1.8% month-on-month. Among them, half-steel tire production was 7.96 million, up 1.4% month-on-month, and all-steel tire production was 0.19 million, up 24.9% month-on-month; completed tire sales were 8.26 million, up 10.3% month-on-month. Among them, sales of semi-steel tires were 8.07 million bars, up 10.1% month-on-month, and all-steel tire sales were 0.19 million bars, up 21.2% month-on-month. With the increase in production and sales combined with the reduction of the double anti-tax rate at the Thai base, the company's profitability continued to increase in the 3rd quarter. The gross sales margin in the single quarter was 39.5%, up 12 pcts year on year, and 4.3 pct month on month; the net sales margin was 29.1%, up 11.5 pct year on year, and 0.3 pct month on month.

The first one at the Moroccan base went offline, and the global layout continues to improve. On September 30, 2024, the first batch of tire products was officially launched at the company's Morocco plant. This marks that after successfully operating two intelligent chemical plants in Thailand, Morikirin broke out of the Southeast Asia region, where China's tire production capacity is increasingly concentrated, and successfully achieved “Overseas 2.0.” With the important location of the Moroccan factory, we have further improved the global production capacity layout and achieved the “golden triangle” of global production capacity, which is of profound significance in steadily advancing the company's “833plus” strategic goals and enhancing its position in the industry.

The Moroccan plant will achieve large-scale production in 2025, and is expected to release 6-8 million bars of production throughout the year, and achieve full production of 12 million bars in 2026. The continued release of new production capacity will also drive the company's performance to grow rapidly.

Profit Forecasts, Valuations, and Ratings

With the expansion of new production capacity and the acceleration of overseas layout, the company's steady growth in performance will also achieve a further increase in global market share. Considering that Morocco's volume progress slightly exceeded expectations, we adjusted the company's net profit for 2024-2026 to be 2.329 billion yuan, 2.615 billion yuan, and 2.926 billion yuan (increases were 6%, 7%, and 6%, respectively), and the current market value corresponding to PE valuation was 11.22/9.99/8.93 times, respectively, maintaining the “buy” rating.

Risk warning

Raw material prices fluctuate greatly, the release of new production capacity falls short of expectations, international trade frictions, sea freight price fluctuations, RMB exchange rate fluctuations, and “double reverse” tax rate fluctuations