Linglong Tire (601966) Company Review: Equity Incentive Target Clear, Tire Leading Growth Expected

Linglong Tire (601966) Company Review: Equity Incentive Target Clear, Tire Leading Growth Expected

The company released the budget of the stock incentive plan for the 2019 budget: The number of additional shares proposed to supplement the 295 incentive objects within the company is 12,807,000 shares, accounting for 1 of the company’s share capital of 1,200,013,403 shares on the date of the announcement of the incentive plan.


The grant price of the stock is priced at 10.

38 yuan / share.

The budget stock authorized by this incentive plan will be adjusted in three stages: 1) The first stage starts from the first trading day after 12 months from the date of completion of the registration of grants to the last within 24 months of the date of completion of the registration of grantsAs of the day of a trading day, the cancellation ratio was increased by 30%; 2) The second and third periods were postponed for one year, respectively, and the cancellation ratio was 30% and 40%.

  Analyze and determine that the incentive plan has clear evaluation goals, corresponding to a 30% / 15% / 13% increase in performance in 19-21 years. The incentive plan will be implemented in three phases and three phases. The management method will be based on 2018 net profit.Net profit in 2021 is not less than 30%, 50% and 70% respectively, corresponding to 15-20 in 2019-2021.

4, 17.

7, 20.

US $ 1 trillion, with annual growth rates of 30 in ten years.

0%, 15.

4%, 13.


The company is currently at a stage of rapid business development. The expansion of supporting customers in the front-loading plants is better, and the replacement demand in the after-sales retail market is stable. We believe that the company’s performance in the next three years is likely to complete its assessment goals.

The company’s purpose of launching this equity incentive is to: 1) In order to further establish and improve the company’s long-term incentive mechanism to attract and retain outstanding talents.

2) Fully mobilize the enthusiasm of the company’s directors, senior managers and other key personnel to effectively combine the interests of shareholders, the company and the core team, so that all parties can pay attention to the company’s long-term development and promote the company’s market competitiveness andSustainable development capabilities.

The performance of Q1-Q3 in 2019 increased rapidly, and the cost advantage was significant.

100 million, an increase of 13 in ten years.

3%; net profit attributable to mother 12.

10,000 yuan, an increase of 37 in ten years.


The company’s rapid growth in performance has mainly benefited from: 1) smooth customer development and new orders driving revenue growth.

The company actively explored the sales market, improved product quality, and achieved 1,470 tire product sales in the third quarter of 2019.

50,000 articles, an increase of 10 in ten years.


2) Price advantage of raw materials guarantees high gross profit margin.

  2019Q1-Q3 company gross profit margin 26.

0%, 2019Q3 is as high as 27.

5%, far exceeding the industry average, indicating that the company has alternative bargaining power in the supply of important raw materials such 杭州夜网论坛 as rubber. In the third quarter of 2019, the overall prices of the five main raw materials of natural rubber, synthetic rubber, carbon black, steel cord, and cord fabric wereBy the drop.


3) Three rates are strictly controlled to ensure a high net interest rate.

2019Q1-Q3 company’s sales expense ratio, management expense ratio, research and development expense ratio are 6 respectively.

0%, 3.

0%, 4.

2%, three rates maintained at previous levels, refined management to improve operating efficiency, and reported that the company’s net interest rate has gradually increased.

7pp to 9.


  Supporting customers drive the retail market and drive long-term growth. The logical tire business is mainly divided into supporting (front-loading) and retail (back-market) markets. The company combines the supporting-pulling retail model to achieve two-way development: 1) in the supporting market, the companyBy improving the product series, upgrading product performance, optimizing product structure, and continuously improving product grades, the 2019H1 successfully matched the two main tires of FAW-VW Jetta, Changan Ford Fores, two Renault electric vehicle tires and FAW Red Flag L5 passenger car civilian version.Inflatable tires, etc.

After successfully entering the joint venture car company supply chain, the company is expected to continue to penetrate more products and develop more high-quality car company customers.2) In the retail market, the replacement demand stems from supporting equipment. After the supporting market achieves a breakthrough, the company’s retail market can grow for a long time. At the same time, the company upgrades its retail marketing strategy, deeply cultivates subdivided products, develops blank areas, and sinks channels.Both internal and external tire retail sales have increased by more than 10%.

  Investment recommendations The equity incentive assessment has clear targets, and the growth of scarce tire leaders can be expected.

In the global tire industry where the competition is relatively stable, the company is the first tire supplier in the domestic front-loading industry to penetrate the supply chain system of joint venture car companies, and has two core competitiveness: ① high-quality customer structure; ② significant cost advantages; retail marketRelying on the steady increase in the number of holdings, the company’s supporting retail sales will drive retail growth in the long run.

We maintain our profit forecast: The company is expected to achieve revenue of 176 in 2019-2021.


5, 232.

200 million, net profit attributable to mother 16.

1, 18.

7, 20.

700 million, EPS is 1.

34, 1.


72 yuan, corresponding to PE 15.

5, 13.

3, 12.

0 times.

Give the company 18 times target PE in 2019 and maintain target price of 24.

12 yuan to maintain the “overweight” level.

  Risks suggest the impact of changes in the price of rubber and other important raw materials on the gross profit level; new orders fell short of expectations; changes in the competitive landscape, external pressure from overseas tire giants, and price wars affecting the company’s profitability.