High barriers and good profits, enterprises to accelerate the layout

With the acceleration of the world's industrialization process, the global off-highway tire production continues to rise. According to Frost and Sullivan estimates, the global off-highway tire production in the engineering tire to maintain a continuous upward trend, from 100 million in 2016 to 340 million in 2021, the compound annual growth rate of 27.73%, 2026 global engineering tire production will further increase to 500 million.

The demand for construction machinery is strong, driving the demand for construction tires to rise. In recent years, China's construction machinery sales have grown significantly, from 490,000 units in 2015 to 1.71 million units in 2022, with a CAGR of 19.42%, mainly due to the strong demand for downstream infrastructure and mining. In particular, in 2020-2021, the sales volume of construction machinery in China has increased significantly from 1 million to 1.8 million, and the growth rate has further increased. In 2022, China's construction machinery sales fell 8.13% to 1.71 million units, on the one hand due to the high base in 2021, on the other hand, we believe that is mainly the real estate industry cycle downward factors, but still higher than the 2020 level. We believe that in the future, with the gradual strengthening of national macroeconomic policy control, infrastructure construction is accelerating, and the policy of the real estate industry is gradually optimized, the demand for construction machinery is expected to rise, and the demand for construction machinery tires is also expected to rise further. Construction machinery exports continue to force. In addition, China's construction machinery industry is in a perennial trade surplus position, after 2020, driven by strong overseas demand, China's construction machinery exports have significantly recovered and increased, with a year-on-year growth rate of 62% and 30% in 2021-2022.

1. The output of mineral products shows a steady growth trend, driving the demand for mining tires

From a global perspective, the output of many mineral products is generally stable. Taking coal as an example, global coal production has increased significantly since the beginning of the 21st century, fluctuating around 8 billion tons from 2011 to 2021, and reaching a record high of 8.8 billion tons in 2022. From 2005 to 2022, global copper mine production increased from 14.91 million tons to 21.9 million tons, with a compound annual growth rate of 2.28%, basically maintaining an annual growth trend. From 2017 to 2022, the global production of iron ore, cobalt ore, nickel ore and other minerals has fluctuated, but the overall growth trend is still maintained.

From the perspective of our country, the output of many major mineral products continues to grow. From 2004 to 2022, China's raw coal production increased from 1.992 billion tons to 4.559 billion tons, with a compound annual growth rate of 4.71%; China's iron ore production increased from 310 million tons to 967 million tons, with a compound annual growth rate of 6.53%. Cement production increased from 967 million tons to 2130 million tons, with an annual compound growth rate of 4.48%. The output of ten non-ferrous metals also increased from 14 million tons to 68 million tons, with a compound annual growth rate of 9.00%. With the growth of investment in the domestic mining market, the demand for mining machinery tires has risen. We believe that with the rise in demand for mineral products and the development of the mining industry, China's mining machinery industry is developing steadily, and the demand for mining tires is also expected to grow further.

In recent years, the operating income of China's mining industry has increased, and the demand for mining tires is expected to increase. Since 2021, under the influence of tight coal supply and demand, the Russia-Ukraine conflict and other events, China and the international energy and main mineral products prices have risen, and the operating income of China's mining industry has increased by 39% and 31% respectively in 2021 and 2022. Superimposed on China's coal, iron ore and other important raw materials and primary products to maintain supply and stable price policy and other factors, boosted the enthusiasm of enterprises to invest in the mining industry, China's mining industry fixed capital investment in 2021-2022 growth. With the growth of investment in the domestic mining market, the demand for mining machinery tires has risen. We believe that with the rise in demand for mineral products and the development of the mining industry, the demand for China's mining machinery industry is expected to improve, and the demand for mining tires is also expected to further grow.

2. Infrastructure investment is at a relatively high level

The growth rate of investment in infrastructure construction is expected to continue at a high level, driving up the demand for construction machinery tires. According to the statistics of Hailing International construction Machinery Trading Center, infrastructure construction accounts for about 40% of the total downstream demand for construction machinery, and has the largest pulling effect on the demand for construction machinery. In 2022, China has introduced a series of stimulus policies, the approval of infrastructure construction projects significantly accelerated, China's infrastructure investment growth rate reached 11.52%, according to Wind consensus expectations, 2023-2024 China's infrastructure investment growth will remain at a high level.