\u3000\u3 China Vanke Co.Ltd(000002) 984 Qingdao Sentury Tire Co.Ltd(002984) )
Investment summary:
The clouds gradually dissipated and the track recovered strongly
With the rise of domestic products and the expansion of overseas bases, domestic substitution is expected to accelerate. In the past 10 years, the proportion of global CR3 sales fell to 38.3%, while the proportion of Chinese enterprises climbed to 21.1%. The implementation of the dual carbon strategy will further enhance the concentration of China’s tire industry.
With the solution of the problem of car core shortage and the improvement of the penetration rate of new energy vehicles, the automotive industry is expected to continue to pick up, driving the increase of market demand for supporting tires. The demand for replacement tires is related to the car ownership. At present, the per capita car ownership in China is only 1 / 4 of that in the United States, and there is still much room for improvement.
Intelligent manufacturing leads the industry in profitability and overtaking in curve
The company has been deeply engaged in the tire industry for nearly 15 years and has leading advantages in both automobile tire and aviation tire tracks. Over the past five years, the company’s revenue CAGR reached 7%. Net profit attributable to parent company CAGR reached 15%. At the same time, benefiting from intelligent manufacturing and high-end strategy, the company’s gross profit margin is about 5% higher than that of its peers.
The high-end layout is ambitious, and the competitive advantage is becoming more and more prominent
Intelligent transformation helps the company reduce costs and increase efficiency. 1) It improves the employment efficiency of the company. In 2021, the company’s per capita income reached 1.92 million yuan, more than 50% higher than that of comparable companies. 2) it improved the product qualification rate and capacity utilization rate, of which the capacity utilization rate in 2021 was as high as 102%, much higher than the industry average level.
High end product layout. In terms of automobile tires, the company’s sales revenue of high-performance passenger car tires accounts for more than 50%, and its gross profit margin is more than 6-10 percentage points higher than that of economical passenger car tires. In terms of aviation tires, the company has the first mover advantage and technical reserves. It has successfully developed multi specification aviation tire products and entered the supplier list of COMAC C919 and cr929.
Build high-end sales channels based on the mainstream markets in Europe and America
Relying on the first mover advantage and high-end strategy, the company has turned the overseas market into the company’s main market. In the past three years, the proportion of the company’s overseas revenue hovered at 93-97%, about 40% and 20% higher than Linglong and Sailun Group Co.Ltd(601058) respectively, which improved the company’s overseas brand influence and overall gross profit margin.
With the brand effect of overseas operation and the “new retail” channel, the company’s replacement market in China increased by 101.8% year-on-year in 2021. In addition, the company continues to make efforts in the supporting tire market of medium and high-end main engine plants, and has become a qualified supplier for front-line vehicle manufacturers such as Volkswagen Group and Guangzhou automobile. At the same time, it also supplies many new energy models such as GAC new energy and BAIC new energy.
Raised investment projects have been implemented one after another, and the future performance is still expected
According to the company’s “833plus” development strategy, several heavyweight projects will be implemented in the next two years, including 6 million semi steel tires and 2 million all steel tires in Thailand; The project with an annual output of 12 million radial tires in Spain is expected to be put into operation by the end of 2023; The project with an annual output of 80000 aviation tires is expected to be completed in 2022, which will open up growth space for the company’s performance.
Investment suggestion: we estimate that the net profit attributable to the parent company from 2022 to 2024 will be 1.399 billion, 1.857 billion and 2.312 billion respectively, and the earnings per share (EPS) will be 2.15 yuan, 2.86 yuan and 3.56 yuan respectively, corresponding to PE of 13.78 yuan, 10.39 yuan and 8.34 yuan respectively. According to the relative valuation and absolute valuation methods, the reasonable share price of the company is 43-48.7 yuan, and the current share price is undervalued. Considering that the companies with “high-end tire” and “large tire” will still have the advantage of buying high-end tire for the first time in nearly two years, the companies with “high-end tire” will be given the rating of “large tire” for the first time.
Risk tips: raw material price fluctuation risk, international trade friction risk, exchange rate change risk, etc.
