\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 966 Shandong Linglong Tyre Co.Ltd(601966) )
Performance review
On April 28, 2022, the company released the annual report of 2021 and the quarterly report of 2022: the total operating revenue in 2021 was 18.579 billion yuan, a year-on-year increase of 1.07%; The net profit attributable to the parent company was 789 million yuan, a year-on-year decrease of 64.48%. In the first quarter of 2022, the total operating revenue was 4.351 billion yuan, a year-on-year decrease of 12.74%; The net profit attributable to the parent company lost 92 million yuan, a year-on-year decrease of 118.57%. The performance was lower than expected because the improvement of the upstream and downstream of the industrial chain was lower than expected, and the epidemic repeatedly affected the production and sales of the company.
Business analysis
The decline in downstream demand coupled with trade friction, the high price of upstream raw materials combined with the sharp rise in sea freight, and the company’s performance is under obvious pressure under domestic and foreign difficulties. From the demand side, the blocked demand of the automobile market in 2021 will have an impact on the sales volume of tire accessories. In terms of automobiles, due to the shortage of chips, the cumulative production reduction in the global market is about 11.31 million, while in terms of commercial vehicles, due to the switching of five countries and six standards, the demand for medium and heavy trucks has fallen sharply in advance; The demand of the replacement market is also weak in the context of repeated outbreaks. From the cost side, the prices of main raw materials in 2021 were in a high fluctuation state. Among them, the annual average prices of natural rubber and carbon black increased by 25% and 52% respectively year-on-year. Under the cost pressure, the gross profit margin of the company’s tire products fell by 11% to 16.9% year-on-year, of which the gross profit margin in the fourth quarter was only 6.2%. Considering that the current raw material price is still at a high level, and the epidemic affects the downstream demand, it is expected that it will take time for the company’s performance to recover.
With clear strategic planning, the company continues to make efforts to support the market, and has made outstanding achievements in the field of new energy. The company has been deeply engaged in the original tire market and ranked first in supporting in China for many years. At present, there are seven of the world’s top 10 automobile factories, with a total supporting amount of more than 200 million. At the same time, in 2021, the sales growth in the field of new energy supporting reached 182%, and the overall market share was close to 20%, ranking first in China’s tires. Although the overall industry is at a low point and the company’s performance has failed in the short term, under the global layout and adhering to the supporting strategy, the long-term growth trend in the future remains unchanged.
Investment advice
The company is the leader of domestic tires. With the further expansion of its scale, it is optimistic about the continuous improvement of long-term market share. However, considering that the cost pressure has not improved and the impact of the epidemic on production and marketing, the company’s net profit attributable to the parent company in 22-23 years is lowered to 730 million yuan (- 63.7%) and 1.42 billion yuan (- 46.7%), and the net profit attributable to the parent company in 24 years is expected to be 2.19 billion yuan. The current market value corresponding to PE is 36.7, 18.9 and 12.2 times respectively, maintaining the “buy” rating.
Risk tips
The epidemic affected tire production and sales, international trade frictions, fluctuations in raw material prices, and the release of new production capacity was less than expected
