Mori Kirin released its three-quarter report on October 18: Q3 achieved revenue of 2.23 billion yuan, +1.1%/+11.8% month-on-month, net profit of 0.648 billion yuan to mother, and +67.5%/+13.0% month-on-month. In the first three quarters, the company achieved revenue of 6.34 billion yuan, yoy +10.4%, net profit to mother of 1.726 billion yuan (not after deducting 1.718 billion yuan), and yoy +73.7% (after deducting yoy +79.4%), corresponding to earnings per share (diluted) of 1.68 yuan.

The company's Q3 performance increased sequentially, slightly below our forward-looking expectations (0.7 billion yuan). We believe it was mainly affected by high ocean freight rates and exchange losses due to RMB appreciation. Considering the commissioning of the company's Morocco plant, future performance is expected to further increase and maintain a “buy rating.”

Tire orders continue to be full, and the performance is once again brilliant

Order demand for the company's high-quality, high-performance semi-steel tire products in the European and American tire markets continues to be in short supply, benefiting from the return of shipping capacity to normal. A total of 23.358 million tire sales were completed in the first three quarters, yoy +8%; among them, semi-steel tires sold 22.682 million bars, yoy +7%; all-steel tires sold 0.677 million bars, yoy +30%. In the third quarter, the company achieved total tire sales of 8.261 million bars, +10% month-on-month; of these, semi-steel sales were 8.069 million bars, +10% month-on-month; all-steel tire sales were 0.192 million bars, +21% month-on-month. According to the company's disclosure, it still received some US export tax rebates in the third quarter. The tax rebates offset operating costs, thereby raising the current gross margin level. The company's comprehensive gross margin for the first three quarters was 35.4%, yoy+11pct, of which Q3 gross margin was 39.5%, +4pct month-on-month.

The Moroccan tire project was officially put into operation. According to the company's official account, the Moroccan factory was officially put into operation on September 30, 2024, successfully achieving “Going Overseas 2.0”. The Moroccan factory will achieve large-scale release in 2025. It is expected to release 6-8 million bars of production throughout the year, and achieve full production volume of 12 million bars in 2026. Currently, the Moroccan factory's intended orders have exceeded the planned production volume for next year. Further improvement of the company's global layout will significantly enhance the company's overseas competitiveness, and the company's performance is expected to grow steadily as production capacity is added one after another.

Morocco project contributed incremental performance and maintained a “buy” rating

Considering that the company's semi-steel tire orders continue to be in short supply and shipping costs have declined since the third quarter, we expect the company's net profit to be 2.39/3.02/3.63 billion yuan (previous value 2.28/3.01/3.63 billion yuan), with a year-on-year growth rate of +75%/+26%/+20%, corresponding EPS of 2.33/2.93/3.53 yuan. Refer to Comparable Company's 25-year Wind consistent average of 12xPE. Considering future incremental performance of the company's overseas projects, we will give the company an incremental performance 25-year 13xPE, target price 38.09 yuan, maintaining a “buy” rating.

Risk warning: the risk of falling downstream demand, and the risk that the commissioning of new projects will not meet expectations.