\u3000\u3000 Qingdao Sentury Tire Co.Ltd(002984) (002984)
Event:
On February 14, 2022, Qingdao Sentury Tire Co.Ltd(002984) released the annual report of 2021: the company achieved an operating revenue of 5.177 billion yuan, a year-on-year increase of 10.03%; The net profit attributable to shareholders of listed companies was 753 million yuan, a year-on-year decrease of 23.17%; The net profit attributable to shareholders of listed companies after deducting non recurring profits and losses was 684 million yuan, a year-on-year decrease of 33.81%; The net cash from operating activities was 832 million yuan, a year-on-year decrease of 50.53%; The basic earnings per share is 1.16 yuan.
Key investment points:
Under the dual pressure of raw materials and shipping, Q4 performance declined month on month in 2021
According to the information disclosed in the annual report, the company achieved an operating revenue of 1.312 billion yuan in the single quarter of 2021q4, down 1.63% from 1.334 billion yuan in 2021q3; Compared with 1.163 billion yuan in 2020q4, an increase of 12.86%; The net profit attributable to the parent company in 2021q4 was 181 million yuan, an increase of 2.59% compared with 176 million yuan in 2021q3, and a decrease of 31.76% compared with 265 million yuan in 2020q4. The net profit attributable to the parent company after deducting non-profit in 2021q4 was 102 million yuan, down 37.11% from 162 million yuan in 2021q3 and 66.37% from 305 million yuan in 2020q4. The main reason is the sharp rise in the prices of raw materials and sea freight.
The net cash flow from the company’s operating activities was 832 million, a year-on-year decrease of 50.53%, mainly due to the sharp rise in the prices of raw materials and sea freight during the reporting period and the increase in the cash outflow from the company’s operating activities. At the same time, we can see that the company’s inventory at the end of 2021 was 1.354 billion, an increase of 70.5% over the beginning of 2021, and the tire inventory was 4.3554 million, a year-on-year increase of 37.51%, which is related to the rise of raw materials and the obstruction of shipping.
The production and sales volume increased steadily, the average price of single tire increased, the gross profit margin decreased, and the gross profit margin in export and overseas markets was higher than that in China.
The tire output of Qingdao Sentury Tire Co.Ltd(002984) increased from 18.7341 million in 2019 to 22.4405 million in 2021, and the sales volume also increased. The average price of single tire increased from 238.41 yuan / piece in 2019 to 242.26 yuan / piece in 2021. The gross profit margin decreased, but the gross profit margin of export and overseas markets was always higher than that of Chinese market.
In 2021q4, the cost of comprehensive raw materials still rises sharply, and the company’s performance is under pressure
In 2021, the price of bulk chemicals rose sharply due to multiple factors such as double carbon policy and double control of energy consumption. The main raw materials of the company’s tire products have increased by varying degrees. At the retail end, the company conducts cost pressure to a certain extent through timely price adjustment;
In 2021, the average price of natural rubber was 13480.41 yuan / ton, a year-on-year increase of + 17.43%; CIS polybutadiene rubber 13205.21 yuan / ton, a year-on-year increase of + 43.99%; Styrene butadiene rubber 13337.12 yuan / ton, a year-on-year increase of + 37.20%; Cord fabric 29329.00 yuan / ton, a year-on-year increase of + 53.84%; Carbon black was 8162.60 yuan / ton, a year-on-year increase of + 47.02%; Accelerator 26055.98 yuan / ton, a year-on-year increase of + 29.64%; Antioxidant 16015.40 yuan / ton, a year-on-year increase of + 20.05%. In Q4 of 2021, the average price of natural rubber was 13680.43 yuan / ton, with a year-on-year increase of + 0.68% and a month on month increase of + 6.40%; CIS polybutadiene rubber 14771.20 yuan / ton, up + 40.26% year on year and + 8.08% month on month; Styrene butadiene rubber 13304.35 yuan / ton, year-on-year + 17.06%, month on month + 0.43%; Cord fabric 30270.16 yuan / ton, year-on-year + 46.25%, month on month -0.41%; Carbon black was 9079.03 yuan / ton, with a year-on-year increase of + 31.17% and a month on month increase of + 16.87%; Accelerator 30643.28 yuan / ton, + 33.94% year on year and + 31.65% month on month; Antioxidant 17448.39 yuan / ton, up + 3.11% year on year and + 30.63% month on month. According to our calculation, the price index of tire raw materials in 2021 was 165.95, up from + 36.96 in 2020; Among them, Q4 in 2021 was 175.98, compared with Q4 + 27.49 in 2020 and Q3 + 14.44 in 2021. By the middle of February 2022, the price index of tire raw materials was 168.66, and the high price index of tire raw materials fell back.
In 2021q4, the sea freight from China to the east of the United States has eased, and the sea freight from Thailand to the east of the United States is still rising. With the mitigation of the epidemic, it is expected to ease
In 2021, the global trade in goods is booming and the demand for centralized transportation is strong. The global epidemic remains the main challenge. The operation efficiency of overseas ports has decreased, the congestion is serious, the container turnover rate has decreased, and the sea freight has continued to rise. Since 2021, the growth rate of shipping demand has been much greater than that of container ship capacity. The growth of transport capacity can not meet the demand of export growth, resulting in short-term supply-demand mismatch, resulting in the shortage of shipping resources, and the container freight rate has been rising. Although the export of the company’s tire products is FOB, the sharp rise of shipping charges will affect the price adjustment of export products, Reduce the gross profit margin of the company’s overseas sales; On the other hand, high ocean freight will also suppress the enthusiasm of overseas customers for goods, suppress the company’s export volume, and then form inventory.
As of February 11, 2022, the FBX index (Baltic Sea Container Freight Index) from China to the West US port was US $15217 / feu (Note: feu refers to the container with the length of 40 feet as the international unit of measurement), which was 11.09 times that at the beginning of 2020; The FBX index from China to Meidong port is US $16745 / feu, which is 6.32 times higher than that in early 2020; The FBX index from China to European ports is US $14727 / feu, which is 7.80 times higher than that in early 2020.
According to our estimation, according to the current data, a 40 foot container can carry half steel tires with a value of US $29700. The corresponding route freight is US $15200 in the west of the United States (accounting for 51.18% of the value), US $16700 in the east of the United States (accounting for 56.23% of the value), and US $14700 in Europe (accounting for 49.49% of the value). The freight rate is 6-11 times higher than that in early 2020.
At the same time, according to the data of tscn, as of early February 2022, the freight rate from Thailand to the east of the United States was US $16745 / feu, which was 5.54 times higher than that in early 2020. The epidemic is still having an adverse impact on the container freight rate in Thailand. As the epidemic situation eases, it is expected to ease.
In 2021, China’s automobile output was 26.528 million, a year-on-year increase of + 7.73%; The output of new energy vehicles was 3.677 million, a year-on-year increase of + 152.54%; The output of trucks was 4.518 million, a year-on-year increase of – 13.15%. Among them, in Q4 of 2021, China’s automobile output was 7.9825 million, with a year-on-year increase of – 1.06% and a month on month increase of + 38.27%; The output of new energy vehicles was + 1.43 million, a year-on-year increase of + 1.43 million; The output of trucks was 945400, with a year-on-year increase of – 29.41% and a month on month increase of + 28.81%.
Although there is great pressure in 2021, we believe that the performance of Qingdao Sentury Tire Co.Ltd(002984) is expected to reverse in the future, based on the following judgment:
1) the steady economic policy has gradually increased. We have also observed that China’s automobile production has begun to reverse, and China’s demand will improve in the future.
Under the difficult situation of the tire industry, it is difficult for the price of raw materials to remain high; Meanwhile, with the increase of covid-19 epidemic prevention and control measures, the gradual withdrawal of U.S. economic stimulus policy and the strengthening of global shipping congestion control, the sea freight price is expected to be reduced in the future.
2) Thailand phase II ” Qingdao Sentury Tire Co.Ltd(002984) tire (Thailand) Co., Ltd. annual output of 6 million high-performance semi steel radial tires and 2 million high-performance all steel radial tires expansion project” has been basically completed and is expected to be put into operation in 2022. Thai products have high pricing and labor costs. The release of phase II production capacity in Thailand is conducive to the improvement of the company’s profits.
3) in the fourth quarter, some Chinese listed tire companies gradually began to lose money. As the cost composition of the tire industry is mainly composed of raw materials, we expect a large number of tire enterprises to lose money to cash flow, followed by the shutdown of large-scale tire enterprises, and the price rise of tires has begun.
4) the company’s products are mainly large-size and high-performance passenger cars and light truck tires, with higher added value, stronger premium ability in corresponding pricing links and higher gross profit margin. The growth of its sales volume and sales revenue will promote the company’s profitability.
5) in 2021, the company will actively promote the complete construction of the production line of the “annual output of 80000 aviation tires (including 50000 retreaded tires) project”; Continue to deepen the cooperative relationship with COMAC; Continue to promote the aviation tire matching of large UAVs; Extensive exchanges with many airlines have laid a good foundation for further cooperation with airlines. At the same time, the company has successfully passed the annual supervision and audit of AS9100 quality management system and the annual quality system inspection of Civil Aviation Administration of China. The level remained at a high level.
The profit forecast and investment rating predict that the net profit attributable to the parent company in 2022, 2023 and 2024 will be RMB 1.310 billion, RMB 1.804 billion and RMB 2.130 billion respectively, corresponding to 15.86, 11.52 and 9.75 times of PE, maintaining the “buy” rating.
Risk tips: changes in tariff barrier policies in major markets, covid-19 virus epidemic caused long-term downturn in tire demand, project production failed to meet expectations, original supporting breakthrough was lower than expected, sales growth failed to meet expectations, sharp fluctuations in raw material prices, exchange rates, safety and environmental protection production, product quality accidents, etc.
