General Shares: Thailand, Cambodia Phase II Capacity Boost Expected to Drive 2025 Growth

2024-10-16 154 Comments

Benefiting from the withdrawal of overseas production capacity due to the previous pandemic and the increased demand for cost-effective products by consumers in Europe and America amid inflation, the export of Chinese tires has accelerated recently, with a continuous increase in global market share.

Among them, General Shares achieved a revenue of 3.068 billion yuan in the first half of this year, a year-on-year increase of 36.91%; the net profit attributable to the parent company was 287 million yuan, a year-on-year increase of 393.32%.

In addition, under the restrictions of "double anti-dumping," local tire companies are vigorously accelerating the layout of overseas production capacity. "The overseas dual bases maintain a good production and sales situation, and the second phase of the Thailand and Cambodia tire projects have been put into production one after another. The production capacity is gradually being released, and it is expected to become a new growth point for performance next year." General Shares Chairman Gu Cui said at the performance explanation meeting on October 8.

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The overseas base will be fully operational next year.

In the past few years, the pandemic has continuously withdrawn overseas production capacity, and the conflict between Russia and Ukraine has led to the closure of overseas tire companies' factories in Russia, further contracting production capacity. However, inflation in Europe and America remains high, consumer prices have soared, and the cost-effective advantages of Chinese tires are highlighted, accelerating exports.

However, Europe and America have conducted "anti-dumping" and "countervailing" investigations on tires exported from China, casting a heavy shadow of anti-dumping taxes on local tire enterprises. In this trend, Chinese tire companies have accelerated global factory construction to cope with industry disturbances such as "double anti-dumping."

General Shares' overseas production capacity construction is relatively rapid. Its first phase of the Cambodia project has been fully operational this year in May, becoming a new profit growth point. At the same time, the second phase of the Cambodia project was奠基开工 in January this year, with a production capacity of 3.5 million semi-steel tires and 750,000 all-steel tires per year.

"The second phase of the Cambodia base has achieved the first tire production line on August 28, and it is expected to be fully operational by 2025. Currently, the Cambodia factory maintains a good production and sales situation, with orders for all-steel tires and semi-steel tires far exceeding the existing production capacity. The company is accelerating the second phase of the project to meet the strong demand of customers." General Shares Secretary Bian Yibo said.

A research report from Guohai Securities revealed that after the second phase of the Cambodia project is fully operational, it is expected to bring a revenue of 1.701 billion yuan and an average annual net profit of 231 million yuan.

"At present, the company's overseas base semi-steel tire orders continue to be in short supply. The daily production capacity of the first and second phases of the Thailand semi-steel factory has exceeded 27,000, and the company will continue to accelerate the capacity climb to meet market demand. It is expected that the second phase of Thailand will be fully operational by 2025." Bian Yibo said.Tire Prices Have Recently Been Increased

The raw materials for tire production mainly consist of natural rubber, synthetic rubber, carbon black, and steel cord, among others. In the cost of tire raw materials, the rise in the prices of natural and synthetic rubber is an important factor suppressing their profits.

Affected by the suspension of production in the first quarter and drought weather in the second quarter, the production in the raw material areas of natural and synthetic rubber has increased slowly, leading to a phased supply tension, and prices have been continuously fluctuating upwards since the first half of the year. At the same time, under the influence of the Federal Reserve's interest rate reduction cycle and domestic economic policy, domestic rubber futures prices have been continuously strengthening before the festival. The Shanghai rubber futures contract 2501 has risen from 17,500 yuan/ton to nearly 19,780 yuan/ton.

Baocheng Futures believes that, at present, the main factors of the long logic of natural rubber reduction are the climate factors in Southeast Asia and the decline of the long-term suitable rubber tapping area, which is difficult to make up in the short term. Therefore, given the current strengthening of domestic and international macro factors, coupled with the long-term reduction logic still existing, it is expected that the Shanghai rubber futures contract 2501 will continue to maintain a relatively strong pattern.

The sharp increase in rubber has led to investors' concerns about the profitability of General Shares. "The company pays high attention to the changes in raw material prices and has recently increased tire product prices," responded Bian Yibo.

Bian Yibo said that General Shares has established a long-term strategic cooperative relationship with the core suppliers of the main raw materials. Based on product planning and market needs, the company continuously optimizes the product structure, uses raw materials with more price advantages under the premise of meeting product performance, and promotes collaborative cost reduction.

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