2024Q3's net profit to mother was under pressure in the short term, maintaining a “buy” rating of 2024Q1-Q3. The company achieved operating income of 4.988 billion yuan, an increase of 35.56% over the previous year, and achieved net profit of 0.38 billion yuan, an increase of 139.49% over the previous year. Among them, 2024Q3 achieved operating income of 1.92 billion yuan, up 33.45% year on year and 18.17% month on month; realized net profit to mother of 0.093 billion yuan, down 7.16% year on year and 30.21% month on month. The company's performance is under pressure in the short term. We lowered the company's 2024 profit forecast and maintained the company's 2025-2026 profit forecast. The net profit for 2024-2026 is 5.51 (-0.61), 0.933, 1.248 billion yuan, and EPS is 0.35 (-0.03), 0.59, and 0.79 yuan, respectively. The current stock price is 14.6, 8.6, and 6.4 times PE for 2024-2026. In the future, along with the release of production capacity in the company's various projects and the increase in gross margin brought about by the increase in the share of semi-steel tire products, the company's performance is expected to grow rapidly and maintain a “buy” rating.

Prices of natural rubber and synthetic rubber continued to rise in Q3, and the company's sales volume continued to release the company's 2024Q3 tire production and sales volume of 5.7025 million bars and 5.518 million strips respectively, up 21.74% and 27.37% respectively over 2024Q2. On the cost side, the prices of 2024Q3's four main raw materials, natural rubber, synthetic rubber, carbon black, and steel cords, increased by 7.33%, increased by 7.10%, decreased by 8.92%, and decreased by 3.26%, respectively, compared to 2024Q2. According to Wind data, the 2024Q3 China export container freight index rose 59.37%, 32.84%, and 34.57% from Q2, respectively, or affected the company's profits. Since October, sea freight prices have declined overall, and the impact on sea freight rates is expected to gradually weaken in the future. In addition, the 2024Q3 exchange rate fluctuated greatly, and the median exchange rate of the US dollar to RMB fell from 7.13 on July 1 to 7.01 on September 30, due to the company's large share of overseas revenue, which may have had a certain impact on the company's exchange profit and loss.

Seizing the “domestic and international double cycle” development opportunities, multiple projects have entered the production capacity release period, and the company has deeply cultivated the “5X Strategic Plan”, grasped the “domestic and international double cycle” development opportunities, and successfully built the three major production bases in China, Thailand, and Cambodia. On June 28, the company successfully put into operation the second phase of the 10 million semi-steel tire project in Thailand. The production capacity of the first phase and phase II of the Thai semi-steel plant has exceeded 0.027 million; the second phase of the Cambodia base completed the first tire production line on August 28, 2024, and is expected to be fully produced in 2025; the company's domestic 6 million semi-steel tire technology improvement project was also put into operation on June 28. The industrial chain of the company's three major bases is expected to further improve its competitiveness in the international market.

Risk warning: Downstream demand falls short of expectations, raw material prices fluctuate greatly, industry competition intensifies, etc.