The Zhitong Finance App learned that Shen Wan Hongyuan released a research report saying that equipment renewal and consumer goods trade-in policies have been strengthened, and construction machinery and automobiles have once again emphasized renewal, elimination and subsidy policies, which is expected to drive demand for original related parts. Combined with continued strong domestic and foreign demand, orders remain in short supply, and the long-term logic of increasing the fundamental share of tires remains unchanged. The overall tire sector valuation is expected to continue to recover. Furthermore, the long-term share increase logic remains unchanged, and companies are expected to maintain high performance growth in 2024. In recent years, the consumption structure of overseas products has changed, and demand in the US market is gradually moving closer to cost-effective products. There is still room for Chinese tire companies to double in North America, and their share in Europe continues to rise.
It is recommended to focus on: Sailun Tire (601058.SH); Mori Kirin (002984.SZ); GM Co., Ltd. (601500.SH).
Shen Wan Hongyuan's views are as follows:
The overall trade-in or subsidy policy may drive demand for original parts in the industrial chain in the future.
1) Construction machinery: The Ministry of Housing and Construction issued a notice to update and eliminate construction machinery and equipment that has been in use for more than 10 years. According to Huicong Construction Machinery Network, the standard holdings of excavators, loaders, forklifts, and rollers in China II and below were 388,000, 362,000, 757,000, and 34,000 units, respectively, accounting for 19.79%, 37.84%, 13.35%, and 23.78% of the 2023 holdings.
The industry expects 70%-80% of old equipment to be eliminated in the future, and 20%-30% of old equipment will generate demand for trade-in.
2) Automobiles: State Council News held a routine policy briefing on April 11. Relevant officials from the National Development and Reform Commission and other departments explained that around the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, according to the specific goals of the “Action Plan”, by 2027, the amount of scrapped cars recycled will about double compared to 2023, and the volume of used car transactions will increase by 45% compared to 2023. According to Shanghai Commerce, previously, on March 2, the Shanghai Municipal Commission of Commerce issued a new fuel vehicle trade-in subsidy policy and a new energy vehicle replacement policy. From January 1 to December 31, 2024, individual consumers scrapped or transferred non-commercial passenger cars and purchased a new national 6B fuel passenger bus or a new pure electric passenger bus can apply for a one-time car purchase subsidy of 2,800 yuan and 10,000 yuan.
The operating rate of the domestic industry continues to be high, and demand for US tire imports is growing steadily.
According to Wind data, the domestic industry's operating rate of half-steel tires has remained high since 2024. As of last week, the operating rate of half-steel was about 77.86% and the all-steel operating rate was about 66.02%, representing strong domestic demand for production capacity. Meanwhile, in January-February 2024, China's export volume of new inflatable rubber tires reached 99.65 million pieces, an increase of 16.2% over the previous year (from Rubber Information Trade Network). The US market imported about 45.26 million tires from January to February 2024, up 28% year on year, up 0.4% from November-December 2023. Among them, passenger car tire imports increased 22% year on year to 27.66 million tires, and truck tire imports increased 38% year on year to 1.07 million (from Rubber Information Trade Network), so overall strong export demand was maintained.
The long-term share increase logic remains unchanged, and companies are expected to maintain high performance growth in 2024.
After the industry was under heavy pressure in 2021-2022, the bank sees it as the starting point for recovery in 2023. As the overseas capital expenditure of various companies continues, overall revenue and profit are expected to maintain rapid growth. In recent years, the consumption structure of overseas products has changed, and demand in the US market is gradually moving closer to cost-effective products. Chinese tire companies still have room to double in North America, and their share in Europe continues to rise. According to the Bridgestone annual report, the global market share of Michelin, Continental, Sumitomo, and Hankook Thai in 2022 was about 15.1%, 6.7%, 3.8%, and 3.4%. The leading domestic companies did not exceed 2%, and the long-term share growth logic of Chinese tires remained unchanged.
Risk warning: 1) Large fluctuations in raw materials affect the company's profit; 2) The company's production capacity cannot be absorbed as expected