In the first quarter of 2014, the company achieved operating income of 93 million yuan, up 3.59% from the same period last year; operating profit of 4.758 million yuan, down 52.62% from the same period last year; net profit belonging to the parent company was 4.5435 million yuan, down 47.08% from the same period last year; and basic earnings per share was 0.06 yuan. The company is a leading enterprise in China's textile carding equipment industry, the main products are metal card clothing, elastic cover card clothing, striped card clothing, fixed cover card cloth, pre-carding board, carding roller, integral cylinder and top comb and other textile carding equipment components. From 2006 to 2012, the company's sales revenue ranked first in China's textile carding equipment industry. In 2012, the company's product market share reached 21.69%.
Income is growing slowly. Affected by the macroeconomic situation and textile raw materials and other factors, the prosperity of the textile industry has been low since 2013, the demand growth rate of middle and low-end textile machinery consumables has slowed down, and the company's product sales have been adversely affected. In the first quarter of 2014, the industry was still in the doldrums, with year-on-year revenue growth of 3.59% and slow growth.
The gross profit margin decreases and the expense rate increases, which affects the profit level. The gross profit margin for the current period was 39.3%, down 4.09 percentage points from the same period last year. The expense rate during the period was 31.16%, an increase of 2.75 percentage points over the same period last year. Among them, the rate of management expenses was 14.51%, an increase of 4.4 percentage points over the same period last year. With the decline in gross profit margin and the increase in the rate of expenses during the period, the net profit rate for the current period decreased by 4.67 percentage points year-on-year to 4.89%, and the net profit belonging to the parent company decreased by 47.08% compared with the same period last year.
In the future, the company's sales of high-end carding equipment products are expected to grow rapidly. The company's products are mainly sold domestically, accounting for 95% of the revenue from domestic products in 2013. At present, the number of textile carding equipment enterprises in China is about 30, and the products are mainly in the middle and low end, and the supply and demand is basically balanced. In the high-end market, the demand for high-end products is growing rapidly. At present, high-end products mainly rely on imports, and products are in short supply. As a leading enterprise in the domestic textile carding equipment industry, the company's high-end product performance is close to the international advanced level and has the ability to compete with international famous enterprises. In the context of the rapid growth of demand for high-end products, the company is expected to gain more market share in the future, and the sales of high-end products will achieve rapid growth.
Earnings forecast: we expect the company's earnings per share from 2014 to 2016 to be 0.41 yuan, 0.50 yuan and 0.61 yuan respectively. According to the latest closing price, the corresponding dynamic PE is 58X, 48X and 40X respectively, maintaining its "neutral" investment rating.
Risk tips: (1) the risk of intensified market competition; (2) the adverse impact of slow demand growth in the textile industry on the company's product sales.