Incident: The company released its 2023 & 2401 financial report on April 24, achieving revenue of 20.065 billion yuan in 2023, +18.58% year-on-year; net profit to mother of 1,391 billion yuan, +376.88% year-on-year. 2401 achieved revenue of 5,045 billion yuan, +15.04% year over year and -10.48% month on month. Net profit attributable to mother was $441 million, +106.32% YoY and +2.31% YoY.
The company plans to distribute cash dividends of RMB 2.86 per 10 shares, totaling approximately RMB 419 million, with a dividend payout ratio of 30.1%. The company plans to use 66.1251 million yuan to repurchase shares and use it for equity incentives.
The industry boom continued and the price of round-brained paint was transmitted, and the sharp rise in volume and price of 2401 drove revenue growth.
The global automotive industry chain recovered in 2023, and domestic and overseas demand picked up markedly. Domestic sales/exports and overseas revenue of 10.469/9.397 billion yuan, +22.48%/+14.88% YoY.
Tire sales volume +26.09% YoY, average price -5.81% YoY. Tire production was +20.40% year-on-year, production and sales rates increased and inventories decreased. Among them, the output of semi-steel tire/all-steel tire/oblique tire was +19.20%/+30.79%/-6.19% year-on-year. 2401 tire sales were +13.47% year-on-year, -16.10% month-on-month. The month-on-month decline was mainly due to the impact of the Spring Festival holiday. Due to high inflation in European and American countries, the cost performance ratio of domestic tires is prominent, exports maintain a high growth rate and operating rate remain high, industry prosperity continues, and sales are growing rapidly. According to Baichuan Yingfu, the average operating rate of 2401 all-steel/semi-steel tires in China was 59.53%/73.02%, compared with +2.96pcts/+12.50pcts. Demand is improving, and the company's capacity utilization rate continues to increase. The average price of 2401 was +1.84% year-on-year and +7.27% month-on-month, mainly due to the company's price increase and product structure changes after Thailand's double anti-tax rate fell. Affected by the price increase of 2401 crude oil and the increase in the price of core raw materials, the company issued another price increase notice in March and April 2024.
The decline in raw material prices increased gross profit, and Qin Guoshuang repeatedly lowered the tax rate to increase profits.
The company's gross profit margin in 2023 was 21.01%, +7.4pcts year over year. The gross margin for domestic/export sales was 14.78%/27.35%, +8.96pcts/+6.48pcts year-on-year. The sharp increase in the company's gross margin in 2023 is mainly due to a fall in global energy prices and an increase in the supporting market structure. According to the company's annual report, the average purchase price of the company's natural rubber/synthetic rubber/carbon black/steel wire cords/cord cloth in 2023 was -9.00%/-10.28%/-10.71%/-14.31%, respectively. The company's 2401 gross margin was 23.43%, +6.47 pcts year on year and -0.95 pcts month on month. The change was mainly due to the year-on-year decline in raw material prices and the month-on-month increase. In January, the US Department of Commerce announced the final ruling on the anti-dumping investigation and review of Thai passenger car and light truck tires. The corporate tax rate was reduced from 21.09% to 4.52%. North America's exquisite tax rebates promoted the company's profit improvement, and was conducive to subsequent acquisition of orders from the Thai base.
It is expected that the industry will continue to prosper and the increase in production capacity in Serbia will drive performance growth. The company continues to advance the “7+5” strategy, digital intelligence transformation, and develop supporting middle and high-end markets. It is expected that the trend of production capacity globalization and product structure optimization will continue, and the release of production capacity in Serbia in 2024 will drive performance growth. According to the company's annual report, the company's production capacity is concentrated on completion in 2024.
1) Domestic base: The company's Guangxi base produces 170,000 off-highway tires (OTR) and is expected to be completed 24H1; the Hubei base will have 12 million passenger and light truck tires completed in 2024; the Jilin base will produce 12 million passenger and light truck tires per year; the annual output of 12 million passenger and light truck tires will be put into operation in 2024.
2) Overseas base: The company's Serbian base obtained trial permits for the first phase of truck tires and passenger tires in May and December 2023, respectively. Its production capacity of 1.6 million truck and bus tires will be completed in 2024, and 12 million passenger and light truck tires will be completed in 2025.
The company's net profit for 24/25/26 is estimated to be 22.73/26.72/3,095 billion yuan, covered for the first time, giving it a “buy” rating.
Risk warning:
Project construction fell short of expectations; export growth fell short of expectations; raw material prices fluctuated greatly.