Report summary

Incident: The company released its report for the third quarter of 2024. In the first three quarters of 2024, revenue was 23.63 billion yuan, +24.3% year over year; net profit to mother was 3.24 billion yuan, +60.2% year over year; net profit after deducting non-return to mother was 3.13 billion yuan, +49.0% year over year. Among them, Q3 achieved revenue of 8.47 billion yuan, +14.8% year over month; net profit to mother of 1.09 billion yuan, +11.5% year over month, -2.3% month on month; net profit without return to mother of 1.07 billion yuan, +11.4% year on year and +3.6% month on month.

Profitability declined slightly compared to the same period last year. Q3 The company's gross profit margin was 27.7%, -0.1pp year-on-year, and -2.1pp month-on-month. The company's sales/management/R&D/finance expense rates were 5.4%/3.1%/3.2%/1.1%, respectively, +1.3/+0.0/ -0.3pp, compared with +0.4/-0.2/+0.0/+0.0pp, respectively. Taken together, the company's net profit margin was 13.1%, -0.6pp year on year, and -1.3pp month-on-month.

Production and sales volume is close to 20 million, and the prices of products and raw materials fluctuate. Q3 The company produced 19.21 million tires and sold 19.33 million pieces; in terms of product prices, the average price fell 5.55% year on year and increased 0.36% month on month due to factors such as changes in product structure; in terms of raw material prices, the overall price of the company's four main raw materials, natural rubber, carbon black, and steel wire cords, increased 15.08% year on year, up 1.77% month on month.

It is proposed to invest 100 million US dollars in Cambodia, opening up room for growth. Sailun Group plans to lease about 750 hectares of land to build the Kampot Special Economic Zone in Cambodia. It plans to introduce leading global enterprises such as new chemical materials and waste rubber recycling related to the rubber industry to settle in. The total investment of the project is estimated at 111.9 million US dollars, mainly land costs. According to the company's estimates, the total return on investment of the project was 4.6%, the total financial internal return after tax was 7.0%, and the payback period after tax was 8.2 years. The cumulative surplus capital of the project until the end of the calculation period was 162.095 million US dollars.

Profit forecast: Considering that the company's sales growth exceeded expectations, the 2024-2026 net profit forecast was raised to 4.39, 5.13, and 5.87 billion yuan (previous values were 3.99, 4.79, and 5.49 billion yuan), with year-on-year growth rates of 42%, 17%, and 15%, respectively.

Corresponding PE is 11X, 10X, and 8X respectively, maintaining a “buy” rating.

Risk warning: The global and domestic macroeconomic environment is uncertain, industry recovery falls short of expectations, and the risk of international trade friction is increasing.