Investment suggestion
The layout of the company's industrial chain is complete, the degree of management is almost extreme, the production capacity of yarn-dyed fabrics is the second in the world, and it always maintains a leading position in the field of mid-range yarn-dyed fabrics. The company has been listed for many years to maintain sound performance, with cotton prices gradually stable, RMB exchange rate gradually stable and the company's internal potential tapping capacity continues to improve, the company is expected to return to the growth channel in the future. In addition, the company has a certain extension of mergers and acquisitions expectations, new energy, environmental protection business gradually layout, the second main business expansion is expected. It is predicted that from 2017 to 2018, the EPS is 1.15,1.26 yuan respectively, and the corresponding PE is 12.3X and 11.3X respectively. The company's current market capitalization is small, the PB is only about 1.5 times, the margin of safety is sufficient, and the investment rating of "recommended" is maintained.
Main points of investment
Net profit decreased by 4.48% over the same period last year, mainly due to increased exchange losses: the company's operating income in the first half of 2017 was 1.969 billion yuan, up 5.47% from the same period last year; the net profit attributed to shareholders of listed companies was 141 million yuan, down 4.48% from the same period last year, and the net profit after deducting 96 million yuan was 12.08% lower than the same period last year; earnings per share were 0.43 yuan. Of this total, the operating income in the second quarter of 2017 was 1.081 billion yuan, up 8.77 percent over the same period last year; the net profit attributable to the shareholders of the parent company was 81 million yuan, down 9.28 percent from the same period last year; the net profit after deducting 59 million yuan was 12.56 percent lower than the same period last year; and earnings per share was 0.25 yuan.
During the period, the expense rate remained stable, and the gross profit margin and net profit rate decreased: in the first half of the year, the company's expenses remained basically stable, and the expense rate increased slightly compared with the same period last year (0.31pct). Among them, the sales expense rate decreased by 0.26pct to 4.32% compared with the same period last year; the management expense rate decreased by 0.06pct to 3.91% compared with the same period last year; and the financial expense rate increased by 0.63pct to 2.53% year-on-year, mainly because the exchange loss of the company increased by about 14 million yuan due to the significant appreciation of the RMB exchange rate in the same period. Due to the dual effects of lower gross profit margin caused by rising production factor costs and higher expense rates during the period, the company's net profit growth was lower than revenue growth, and net profit fell 0.64pct to 6.99% compared with the same period last year.
The industry synergy effect is obvious, and the value chain mining is constantly deepening: at present, the company has a complete industrial chain of ginning, textile, dyeing, weaving, finishing, knitting, home textile, printing and dyeing, clothing, thermoelectricity and sewage treatment. The production capacity of yarn-dyed fabrics is the second in the world, and its business performance ranks in the forefront of the national textile industry.
The company currently has an annual production capacity of 210000 yarns, 160 million meters of yarn-dyed fabrics, 70 million meters of printed and dyed fabrics, 11 million shirts, 30 million meters of home textile fabrics, and 6000 tons of knitted yarn and knitted fabric dyeing. In the first half of the year, the revenue of the company's yarn-dyed fabrics was 874 million yuan, down 6.47% from the same period last year; 285 million yuan for printing and dyeing, up 2.78% from the same period last year; 12 million yuan for printed fabrics; 214 million yuan for clothing, down 1.28% from the same period last year; cotton yarn 192 million yuan, up 23.63% over the same period last year; electricity, steam, sewage treatment, compressed air 31 million yuan, an increase of 1.65% over the same period last year Other products totaled 360 million yuan, up 42.92% from the same period last year. In the future, the company will continue to give full play to its industrial synergy, effectively control production costs, adapt to changes in the market and products, and develop to the high-end value chain.
The global production capacity layout is gradually improved, and domestic sales are growing at a high speed against the trend: in the first half of the year, the company actively responded to the "Belt and Road Initiative" economic development strategy and integrated global textile resources. The company has invested in the construction of three clothing factories in Cambodia, and plans to establish a textile industrial park in Ethiopia that integrates spinning, printing and dyeing, yarn-dyed fabrics and ready-made garments, so as to complete the global production capacity layout. and make full use of tariffs, labor resources, raw materials and other advantages to enhance the global competitiveness of enterprises. At the same time, the company has subsidiaries or offices in the United States, Hong Kong, Italy and other regions, and its products are sold to more than 20 provinces and cities across the country, and about 70% of its products are exported to more than 30 countries and regions, including Japan and the United States. In the first half of the year, the company's domestic sales totaled 839 million yuan, up 32.34 percent from the same period last year; sales in the United States totaled 345 million yuan, down 27.41 percent from the same period last year; sales in Europe totaled 279 million yuan, up 6.66 percent from the same period last year; and sales in Japan totaled 26 million yuan, down 52.51 percent from the same period last year. In the future, the company will increase the management and expansion of domestic and foreign markets in order to win more orders.
Leading the world in technological innovation and improving brand image: the company insists on innovation-driven, increases investment in technology and product research and development, and has successively studied and applied more than 50 key technologies, such as low bath ratio dyeing technology, liquid ammonia + tide cross-linking non-ironing finishing process, and obtained more than 200 patents. In the first half of the year, 10 new raw material series, 6 new process series and 8 new function series were successfully developed. We expect the company to significantly improve its brand image in the global consumer market through product design and research and development.
Risk tips: domestic economic growth continues to slow, exchange rate fluctuations risk, cotton and other raw material prices rise.