Company announcement: The company plans to invest approximately US$251 million (RMB 1,772 million) to build 3 million strips of semi-steel, 600,000 strips of all-steel, and 37,000 tons of off-road projects in Indonesia. According to the Feasibility Report, it is expected to contribute approximately US$270 million in revenue (approximately RMB 1.9 billion) and net profit of US$66.89 million (approximately RMB 4.7 billion) after full production.
With the new production model, the Indonesian plant is expected to have higher production efficiency and lower investment costs. According to the Feasibility Report, the raw materials of the company's current Indonesian plant, such as final rubber refining, large steel wire rolls, and large fiber rolls, etc. have all been shipped to the Cambodian or Vietnamese factory or Dongjiakou factory, thus saving investment in the Indonesian factory's refining process, which is expected to improve Indonesia's production efficiency and reduce production costs, create complementary resources between different production areas, and quickly complete production capacity construction. We expect construction of the Indonesian plant to begin in the first half of 2024 and be put into operation in the first half of 2025.
Indonesia's tire imports are slightly limited, and demand has great potential, resulting in a situation where supply and demand are unbalanced. ① As the fourth most populous country in the world, Indonesia has more than 30 million cars, and demand for automobile tires has great potential for development. In addition, Indonesia has many mines. According to Haian Rubber's prospectus, Indonesia has nearly 90 active large-scale open pit mines, so there is also a large demand for off-road tires. The company's Indonesian factory mainly sells within Indonesia and surrounding regions. ② Tires imported from Indonesia are relatively strict to protect local tire production capacity. Previously, when exporting to Indonesia, the supply volume had to be predicted and locked down in advance from local dealers. The excess portion was difficult to sell. Currently, most local brands are building factories for overseas Tier 1 and 2 brands, so the competitive pressure on Indonesian supply is low.
Profit forecasting and investment ratings: Overall, Sailun's global layout is leading the way, and Mexico and Indonesia have also adopted some different methods, which are expected to more effectively circumvent trade barriers, increase the certainty of building new production capacity, and rapidly increase their market share. Develop in the direction of having products, channels, and brands. Maintaining the profit forecast, the 2023-2025 net profit is expected to be about 31.0, 45.7 billion yuan, and 5.37 billion yuan, corresponding to PE of about 14, 10, or 9 times, maintaining the “buy” rating.
Risk warning: Overseas demand falls short of expectations; capacity construction falls short of expectations, and a sharp rise in raw materials affects profitability