Linglong Tyre(SH:601966) Jin Rong Jie·2025-07-02 07:44Core Viewpoint - The trend of A-share companies seeking secondary listings in Hong Kong continues, with Linglong Tire recently submitting its prospectus to the Hong Kong Stock Exchange for a main board listing, aiming for internationalization and capital expansion [1][2]. Company Overview - Linglong Tire, established in 1994, is a pioneer in China's tire industry, offering a wide range of products including passenger and light truck tires, truck and bus tires, and off-road tires. The company has a strong customer base, including eight of the top ten automotive manufacturers by sales in 2024 [3]. - The company has been listed on the Shanghai Stock Exchange since 2016 and has expanded its scale through mergers and acquisitions, holding a 4.4% market share in the global tire manufacturing industry and ranking as the second largest in China and the sixth globally by 2024 [3][4]. Global Expansion Strategy - Linglong Tire is advancing a "7+5" global strategy, planning to establish seven production bases domestically and five internationally. The company intends to invest $1.19 billion in a new factory in Brazil, with construction expected to begin in Q3 of this year [4]. - The overseas market has become a significant growth driver, with projected sales revenue from international markets exceeding 10 billion RMB in 2024, accounting for nearly half of the company's total revenue [4]. Financial Performance - From 2022 to 2024, Linglong Tire's revenue increased from 17.006 billion RMB to 22.058 billion RMB, with a compound annual growth rate of 13.9%. However, profits have recently declined, with a 22.78% year-on-year drop in Q1 2024 [5]. - The decline in profits is attributed to industry-wide price wars and rising raw material costs, leading to a lower gross margin in the domestic market (12.9%) compared to the overseas market (26.3%) [5][6]. Market Challenges - Linglong Tire faces challenges in the OE tire market, with its market share projected to drop from 14.7% in 2023 to 11.8% in 2024 due to increased competition from domestic brands and pricing pressures [6]. - The company is heavily reliant on major clients like BYD, which has pressured suppliers to reduce prices, impacting Linglong's bargaining power in the domestic market [5][6]. Conclusion - The IPO in Hong Kong represents a new starting point for Linglong Tire's globalization efforts and a critical response to industry changes. The company's ability to replicate the success of its Thai base in Brazil and to upgrade its technology will be crucial for its future growth and competitiveness [7].