QINGDAO SENTURY TIRE CO.(SZ:002984) Southwest Securities·2024-07-11 03:00Investment Rating - The report maintains a "Buy" rating for the company with a target price of 34.35 CNY over the next six months [1][12]. Core Insights - The company is expected to achieve a net profit attributable to shareholders of 10-12 billion CNY in H1 2024, representing a year-on-year increase of 64.95%-97.94% [2]. - The strong demand for semi-steel tires and export markets is anticipated to continue, with domestic tire production and consumption remaining robust [2][3]. - The company's Moroccan project is projected to alleviate capacity constraints and enhance growth potential, with production expected to commence in Q4 2024 [3]. Financial Performance - For Q2 2024, the company expects a net profit of 4.96-6.96 billion CNY, a year-on-year increase of 39.33%-95.51% [2]. - The average price index for tire raw materials increased by 6.5% from Q1 to Q2 2024, indicating manageable cost pressures [2]. - The company’s revenue is projected to grow from 95.18 billion CNY in 2024 to 145.05 billion CNY in 2026, with a compound annual growth rate of 34% for net profit from 2024 to 2026 [3][11]. Production Capacity and Market Demand - The company currently has a semi-steel tire production capacity of 28 million units per year and is expanding with a new facility in Morocco [3]. - The operating rate for semi-steel tires was reported at 79.4%, indicating strong demand, while the operating rate for all-steel tires was lower at 62.2% [2]. Valuation Metrics - The report suggests a price-to-earnings (PE) ratio of 15 for 2024, which is favorable compared to the average PE of 10 for comparable companies in the tire industry [12][13]. - The expected earnings per share (EPS) for 2024 is projected at 2.29 CNY, increasing to 3.20 CNY by 2026 [11].