\u3000\u3000 Shandong Linglong Tyre Co.Ltd(601966) (601966)
Key investment points:
On January 28, the company released the performance forecast for 2021. It is estimated that the annual net profit attributable to the parent company will be RMB 880-1.1 billion, a year-on-year decrease of 50% – 60%; It is estimated that the net profit deducted from non parent company is 750-950 million yuan, a year-on-year decrease of 54% – 64%.
The cost of raw materials and sea freight rose, and the company’s Q4 performance continued to be under pressure. According to the company’s performance forecast, the company’s net profit attributable to the parent company in 2021q4 is expected to be between – 49 million yuan and 171 million yuan, and the net profit deducted from non attributable to the parent company is expected to be between – 70 million yuan and 130 million yuan. The decline of the company’s performance in 2021 is mainly affected by the decline of gross profit margin. First, the main raw materials of the company’s tire products have increased by varying degrees. The increase of the procurement cost of main raw materials directly leads to the sharp increase of the company’s product cost and the decline of the gross profit margin. Second, the rise of shipping costs affects the price adjustment of export products and reduces the gross profit of overseas sales. In 2021, the shipping was extremely tight and the freight rate continued to rise, which greatly increased the cost of overseas customers and restrained the enthusiasm of customers to purchase goods. Therefore, the price adjustment range of the company’s export products was limited, resulting in the decline of gross profit margin.
Serbian factories will soon be mass-produced, and the overseas layout will fall one more child. In 2021, the company adjusted the original “6 + 6” strategy to “7 + 5” strategy (7 production bases in China and 5 overseas production bases). At present, the company has five production bases in China, including Zhaoyuan, Dezhou, Liuzhou, Jingmen and Changchun, and plans to build the sixth production base in China in Tongchuan City, Shaanxi Province; It has two production bases in Thailand and Serbia overseas. Among them, the Serbian factory has been put into trial production at the end of 2021. It is expected that the production and sales of tires will reach 6 million in 2022, contributing to the profit increment of the company.
Fixed increase fund-raising to build Changchun project and boost the scale expansion of the company. According to the plan for non-public offering of A-Shares (Revised Draft) issued by the company in December 2021, the company plans to raise no more than 2.405 billion yuan, which will be used for the production project of Changchun with an annual output of 1.2 million all steel radial tires and 3 million semi steel radial tires after deducting the issuance expenses, as well as supplementary working capital. It is estimated that the construction cycle of Changchun project is 27 months, the after tax internal rate of return is 12.09%, and the payback period is 8.05 years. This fixed increase fund-raising is used to promote the construction of the company’s key projects, which is conducive to the implementation of the company’s development strategy, effectively improve the company’s competitiveness, consolidate its market position and improve the company’s business performance.
Investment suggestion: we believe that the price of the company’s tire products has increased to a certain extent since the end of 2021, and it is expected that the price of natural rubber will fluctuate or narrow in 2022, the cost of raw materials may be relatively stable, while the high sea freight is expected to fall in the long run, and the company’s gross profit margin is expected to be repaired. It is estimated that the basic earnings per share of the company from 2021 to 2022 will be 0.75 yuan and 1.13 yuan, and the corresponding PE valuation of the current share price is 41 times and 27 times respectively. The first coverage will be given a cautious recommendation rating.
Risk warning: raw material price fluctuation risk; The risk of intensified industry competition; The progress of the projects under construction and planned to be constructed is less than expected, and there is a risk of trade friction.
