Incident Overview

The company released its report for the third quarter of 2024. In the third quarter of 2024, the company achieved operating income of 6.34 billion yuan, a year-on-year increase of 10.42%; realized net profit without return to mother of 1.718 billion yuan, an increase of 79.43%; EPS of 2.13 yuan; and a gross profit margin of 35.45%, an increase of 11.08pcts year-on-year.

In the Q3 quarter of 2024, the company achieved operating income of 2.23 billion yuan, up 1.13% year on year and 11.82% month on month; net profit after deducting non-return of 0.659 billion yuan, up 76.12% year on year, up 17.22% month on month; gross profit margin of 39.52%, up 11.99 pct year on year, up 4.26 pct year on month.

Analytical judgment:

Demand remained strong, gross margin continued to rise, shipping costs and raw material prices loosened, and the company's tire demand remained strong, and all-steel tire sales resumed month-on-month growth in the third quarter. In the Q3 quarter of 2024, the company's tire production was 8.1565 million bars, up 5.54% year on year, up 1.82% month on month; among them, half steel tires were 7.963 million, up 6.36% year on year, up 1.37% month on month; all steel tires were 0.1939 million, down 19.71% year on year, up 24.86% month on month; completed tire sales of 8.261 million bars, up 3.64% year on year and 10.29% month on month; among them, half steel tires increased by 10.29%. 8.0694 million bars, up 4.34% year on year, up 10.06% month on month; all steel tire 0.1916 million bars, down 19.12% year on year, up 21.19% month on month. Q3 profitability continued to increase month-on-month. The gross profit margin for the Q3 quarter of 2024 was 39.52%, up 11.99 pcts year on year, up 4.26 pcts month on month; net profit margin was 29.07%, up 11.52 pcts year on year, and 0.31 pct month on month. Since the third quarter of 2024, the price increase of natural rubber has increased. According to Baichuan Yingfu, the average price of 2024Q3 natural rubber was 1,5073 yuan/ton, an increase of 22% year-on-year and 5% month-on-month, and tire companies bear greater cost pressure. However, since entering October, the price of natural rubber has loosened, falling from a high of 17,975 yuan/ton at the beginning of the month to 17,175 yuan/ton on October 28, while shipping costs also began to fall. The decline in sea freight and rubber prices reduces the pressure on exports and costs of enterprises, which is conducive to increasing profits.

Morocco factory officially put into operation, and high-end support continues to advance

According to Morikirin's official account, on September 30, 2024, the first batch of tire products was officially launched at the Moroccan factory. It has now entered the trial production stage. The full production capacity is 12 million high-performance passenger car tires, and it is currently making every effort to climb the slope. The company's second overseas base was officially put into operation, further reducing the risk of international trade barriers and injecting new momentum into the company's growth. According to investors' questions and answers, the company continues to promote high-end equipment and continues to obtain qualified supplier qualifications from world-renowned OEM customers, and has become a qualified supplier for automakers such as German Volkswagen Group, German Audi, Renault, Stellantis (Strantis) Group, GAC Toyota, Guangzhou Automobile, Great Wall Motor, Geely Automobile, BAIC Motor, and Chery Automobile. The company opens up the international market through high-end support, enhances the company's brand image and popularity, and drives the company's brand premium to continue to rise.

Investment advice

Maintaining the profit forecast, the company's revenue for 2024-2026 is estimated to be 9.791/11.763/13.339 billion yuan, respectively, net profit to mother of 1.944/2.3/2.632 billion yuan, EPS of 1.89/2.23/2.56 yuan (change in share capital), corresponding to the closing price of 26.19 yuan on October 28, 2024 PE is 14/12/10 times, respectively. We are optimistic about the company's long-term growth and maintain the company's “gain” rating.

Risk warning

Raw material prices fluctuated greatly, capacity construction and release fell short of expectations, international trade risks, and a sharp decline in demand.