Profitability of tire sector starts to rebound

Prices of tire products began to rise lately.

Industrial Prospect likely to turn better

Cheng Shin Rubber announced to increase tire prices of trucks, buses and passenger cars in the Chinese mainland by 2%-3% starting from Mar.; and to increase tire prices of motorcycles, trucks and buses in Southeast Asian markets by 3%.

Prices of its MAXXIS tires will also increase from Mar.

Tech Tire Repairs declared to increase material prices by 5% to 8%.

Foreign tire producers also decided to increase tire prices of passenger cars in China.

Growing vehicle demand, further concentrated tire industry, and higher raw material prices have all boosted tire prices, and the trend will continue.

Therefore, the prospect of the tire sector is expected to bottom out.

Capital market favors listed enterprises

In the stock market, among the 12 tradable stocks in the tire sector, 11 stocks increased.

Share prices of Aeolus Tyre and Shanghai Huayi Group rose 13.33% and 10.35%, respectively.

Those of MESNAC (5.87%), Qingdao Doublestar (5.31%), Linglong Tire (5.09%), Jiangsu General Science Technology (3.54%), Triangle Tire (3.51%), and Guizhou Tire (3.41%) also grew soundly.

In the two trading days after the Spring Festival, a total of 111 million yuan flew into nine tire-concept stocks.

Meanwhile, business performance of listed tire companies also improved. Four companies' net profits in the third quarter of 2017 increased on a yearly basis.

So far, a total of five enterprises released the business predication for 2017, and two of them expect better performance.

An analyst from Changjiang Securities says the tire sector has come to a turning point of profitability, the profit stopped dropping since the third quarter of 2017, and the gross profit growth rose 22% on a quarterly basis.

As natural rubber price stabilizes, the tire sector starts to make profit, and the industry's revenue and profit this year are likely to far exceed those in 2017.