Key takeaway

In 1H26, adverse external factors such as geopolitical disruptions, sharp fluctuations in raw material prices, and exchange rate movements posed significant challenges to the company's operations. However, as the company gradually passes on costs through price increases and continues to ramp up production at its Morocco plant, its performance is expected to recover. Meanwhile, the company continues to expand in European and US markets with large-size, high-performance tires and new energy vehicle tires. With the EU's countervailing tariffs on passenger car radial tires from mainland China expected to take effect by the end of this year and the company's global footprint set to deepen further, we expect the company to continue gaining global market share and further improving profitability.

Event

In 1H26, the company recorded revenue of RMB4,422mn, up 7.33% YoY; net profit attributable to shareholders of the parent company of RMB420mn, down 37.47% YoY; and net profit excluding non-recurring gains and losses of RMB403mn, down 39.63% YoY. In 2Q26, the company recorded revenue of RMB2,339mn, up 13.37% YoY and 12.34% QoQ; net profit attributable to shareholders of the parent company of RMB210mn, down 32.26% YoY and up 0.34% QoQ; and net profit excluding non-recurring gains and losses of RMB206mn, down 34.21% YoY and up 4.32% QoQ.

Risks:

(1) Global market competition risk: The company positions its tire products in the mid-to-high-end, highperformance, and large-size segments. Its main competitors include internationally renowned brands such as Bridgestone, Michelin, Goodyear, Continental, and Sumitomo Rubber. These competitors hold significant shares of the international market, and China’s tire industry urgently needs to continuously improve and strengthen its capabilities when competing with international brands. The company sells tire products worldwide and enjoys relatively strong brand recognition. However, a gap remains compared with internationally renowned brands, while cultivating consumer understanding, acceptance, and purchasing habits takes time.

(2) Raw material price volatility risk : The prices of the company’s main production raw materials have fluctuated in recent years. As adjustments to tire selling prices tend to lag, they cannot promptly offset the cost impact of rising raw material prices. In the short term, fluctuations in various raw material prices adversely affect the company’s profitability.

(3) Risk of international trade frictions: In recent years, certain countries and regions, including the US, Brazil, Argentina, Australia, and the EU, have launched anti-dumping and countervailing investigations into tire exports from China, while some have introduced relevant trade protection policies. The US has restricted Chinese tire companies’ exports to the US through anti-dumping and countervailing investigations and Section 301 investigations; to restrict tire imports from China, the EU has introduced tire labeling regulations, raised technical standards for tires, and restricted the sale of Chinese tires in the EU market; some international tire companies may also file lawsuits with trade commissions and other authorities in target countries on the grounds of patent infringement to restrict competitors, including Chinese tire companies, from expanding into these markets; the new round of unilateral trade protectionist measures adopted by the Trump administration in the US has further undermined the global trade order.