(Adds details on lockup period, valuation, background)
MILAN, Sept 4 (Reuters) - Italian tyremaker Pirelli, bought by state-owned China National Chemical two years ago, will sell up to 40 percent of its capital in an initial public offering as it plans to return to the Milan stock exchange in October.
The relisting of the world's fifth-largest tyremaker will test demand for a streamlined company that focuses on high-end consumer tyres, after the company's less profitable truck and industrial tyre business was folded into a unit of China National Chemical (ChemChina).
Prior to a 2015 delisting that had followed ChemChina's takeover, Pirelli's shares had traded on the Milan exchange since 1922.
ChemChina acquired the Italian group - one of Italy's best-known brands - through Marco Polo International Italy for more than 7 billion euros ($8.3 billion).
After carving out the industrial tyres business, it left Pirelli to focus on more upmarket tyres for brands such as Mercedes, Audi and BMW.
With high-value products expected to account for some 63 percent of revenue by the end of 2020, Pirelli aims to market itself as a top-end industrial player, sources have told Reuters.
"The goal is to get a better valuation of the group because of its focus on higher-margin products," one source said.
Peers such as Continental AG and Michelin trade at around 10.8 times earnings, according to Thomson Reuters data. Top-end sports car maker Ferrari , another well-known Italian industrial brand that sought a luxury goods company valuation in its IPO, trades at 35 times its earnings.
State-owned ChemChina holds a 65 percent stake in Marco Polo, currently Pirelli's sole shareholder.
Holding company Camfin, whose investors include Pirelli boss Marco Tronchetti Provera and Italian banks Unicredit and Intesa Sanpaolo, has more than 22 percent of Marco Polo. The rest is in the hands of investment fund LTI, linked to Russia's Rosneft.
ChemChina and Camfin have committed not to sell any further Pirelli shares for a year after the group's market debut, while investment fund LTI would hold on to its shares for at least 180 days after the floatation, the statement said.
Following its listing and the approval of its 2018 results, the company said it expected to pay out 40 percent of its net profit in dividends.
Pirelli reported a net profit of 67.6 million euros in the first half of the year and expects revenues to grow an average of 9 percent per year in the period between 2016 and 2020. ($1 = 0.8398 euros) (Reporting by Giulia Segreti, editing by Louise Heavens)