Shandong Daye (SH:603278) Shanghai Securities·2024-03-07 16:00Investment Rating - The report assigns a "Buy" rating for the company, indicating that the stock price is expected to outperform the benchmark index by over 20% within the next six months [8]. Core Insights - The company is a leading player in tire frame materials, experiencing a profit reversal and performance recovery. It has shown continuous revenue growth, with a CAGR of 30% from 2020 to 2022, primarily due to capacity expansion and the acquisition of Shengtong Steel Cord [24][45]. - The company has successfully turned around its net profit in Q1 to Q3 of 2023, achieving a year-on-year increase of 162.73%, driven by recovering demand and a decrease in raw material prices [24][45]. - The company is actively expanding its overseas market presence and optimizing energy projects to reduce costs, with overseas orders increasing by 58% in H1 2023 [44][45]. Financial Summary - Revenue is projected to grow from 59.24 billion in 2023 to 71.67 billion in 2025, with year-on-year growth rates of 13.64%, 10.50%, and 9.48% respectively [45]. - The net profit is expected to recover from a loss of 255 million in 2022 to profits of 1.10 billion, 2.04 billion, and 3.29 billion in 2023, 2024, and 2025 respectively, reflecting significant year-on-year growth [45]. - The company's earnings per share (EPS) is forecasted to improve from -0.75 in 2022 to 0.32 in 2023, 0.60 in 2024, and 0.96 in 2025 [45]. Company Overview - The company was established in 2003 and initially focused on the production of tire steel wire. It has since expanded its product offerings to include steel cord and rubber hose steel wire, becoming a market leader in tire steel wire production [54]. - The company has a stable control structure, with the major shareholders holding approximately 58.62% of the shares, ensuring a professional management team [37][44]. Market Dynamics - The tire industry is experiencing a recovery, with a reported 13.22% year-on-year increase in tire production among key manufacturers in early 2023 [43]. - The company is positioned to benefit from technological advancements and a decrease in raw material prices, which are expected to enhance its competitive edge in the market [43][44].