Incidents:
The company announced 2023 results, achieving operating income of 25.978 billion yuan (YoY +18.6%), net profit to mother of 3,091 billion yuan (YoY +132%), of which 23Q4 revenue was 6.967 billion yuan (YoY +34.4%), and net profit to mother was 1,066 billion yuan (YoY +299%); the company released results for the first quarter of 2024, with operating income of 7.296 billion yuan (+35.8% YoY) and net profit to mother of 1,034 billion yuan (YoY +191%). The company plans to pay a cash dividend of 0.17 yuan (tax included) per share to all shareholders, and the company plans to implement a cash dividend in mid-2024 or before the Spring Festival on the premise that relevant conditions are met.
Production and sales are booming, and the Qingdao giant has increased its profitability. In 2023, demand in the domestic tire market recovered significantly. Foreign dealers gradually switched to inventory replenishment in the second quarter. With the release of the company's production capacity and the increase in capacity utilization, the company's production and sales of all-steel tires, semi-steel tires and off-road tires all reached record highs. In 2023, the company's tire production reached 58.64 million pieces, +35.7% year-on-year, and 55.79 million tires, +27.1% year-on-year, with a comprehensive gross profit margin of 27.84%, year-on-year +9.43pct. In 2023, the company's Qingdao plant's off-road tire technology was transformed into a giant engineering radial tire with a size of 49 inches and above. The giant tire reached a production capacity of 53,000 tons, significantly increasing the company's profit level. In addition, in February 2023, the company released four series of liquid gold passenger car tire products in domestic tire stores: new energy EVs, luxury driving, urban driving and ultra-high performance. Liquid gold products are also expected to bring brand premiums and performance flexibility to the company.
Continue to advance the global layout and expand the overseas base area to four countries: Vietnam, Cambodia, Mexico, and Indonesia. In October 2023, the Cambodian factory invested in a new project with an annual output of 6 million semi-steel tires, and increased the annual production capacity of 6 million semi-steel radial tires in January 2024. After the construction of the project is completed, the Cambodian plant will have an annual production capacity of 21 million semi-steel tires and 1.65 million all-steel tires; in December 2023, the company announced that it plans to establish a joint venture in Mexico to invest in the construction of a project with an annual output of 6 million semi-steel tires; in March 2024, the company plans to invest and build a project with an annual output of 3.6 million radial tires and 3.7 million semi-steel tires. 10,000 ton off-road tire project. Up to now, the company plans to build 26 million all-steel tires, 103 million semi-steel tires, and 447,000 tons of off-road tires per year.
Add profit forecasts and maintain a “buy” rating: We are optimistic about the company's product advantages and global layout advantages. We expect the company's revenue for 2024-26 to be 325/384/42.3 billion yuan (an increase of 42.3 billion yuan in 2026), net profit to mother of 40/49/54 billion yuan (an increase of 5.4 billion yuan in 2026), and corresponding PE is 14X/11X/10X respectively, maintaining the “buy” rating.
Risk warning: Production fell short of expectations, raw material prices fluctuated, and market demand fell short of expectations