Income increased by 5%, gross profit decreased, foreign exchange loss promoted financial expenses to increase, net profit decreased, 4%17H1 realized operating income of 1.969 billion yuan, up 5.47% from the same period last year, and net profit returned to its mother was 141 million, down 4.48% from the same period last year; deducting non-net profit of 96.3573 million yuan, down 12.08% by 0.43 yuan from last year, and 2 yuan (including tax) from 10 parties. The decline in net profit is mainly due to the decline in gross profit margin (1.89PCT) and the increase in exchange losses caused by the appreciation of RMB.
On the expense side, the rates of 17H1 sales, management and financial expenses are-0.26/-0.06/+0.63PCT, respectively. The increase in financial expenses is mainly due to the exchange loss of 9.26 million yuan in the first half caused by the appreciation of RMB, which is much higher than that of-3.92 million yuan in the same period last year.
The sales of cotton and cotton yarn contributed to the growth of revenue, while the revenue of yarn-dyed fabrics fell by 6% due to customer switching. (1) split 17H1 revenue:
In terms of different industries, in the first half of the year, textile and clothing, thermoelectricity (including electricity, steam, sewage treatment, compressed air) and others (mainly cotton sales) achieved business income of 1.578 billion yuan, 31.44 million yuan and 360 million yuan respectively, compared with the same period last year. 0.41%, + 1.65%, + 42.92%.
Among them, the income of textile and clothing products such as yarn-dyed fabric, printing and dyeing cloth, clothing, cotton yarn and printed fabric reached 874 million yuan (- 6.47%), 285 million yuan (+ 2.78%), 214 million yuan (- 1.28%), 192 million yuan (+ 23.63%) and 12.29 million yuan respectively. The decline in yarn-dyed fabric revenue is mainly due to the decrease in the number of orders due to the time difference between new and old customers, and the order price has not changed much (in terms of US dollars, it decreases slightly if the appreciation of RMB is taken into account).
From a regional point of view, domestic sales revenue increased by 32.34% in the first half of the year, and the proportion of income increased to 42.61% from 33.96% in the same period last year, mainly due to the greater contribution to the growth of cotton sales by material subsidiaries; the overall export income decreased by 8.34%. Among them, the income of the United States, Europe and Japan increased by-27.41%, + 6.66% and-52.51%, respectively.
(2) analyze the quarterly changes of income:
16Q1-17Q2 revenue increased by 10.88%, 7.66%,-6.26%, 19.08%, 1.72% and 8.77% respectively compared with the same period last year. The larger increase in 16Q4 revenue was mainly due to the fact that the subsidiary Textile Materials Company sold more cotton in the quarter. The contribution of 17H1 revenue growth still mainly came from the increase in external sales of cotton and cotton yarn. The business fluctuated in each quarter, and Q2 sales increased to accelerate income growth.
The products with the largest share of revenue (44.38% of 17H1) have reduced orders for yarn-dyed fabrics under the background of weak external demand since 16Q3, and there has been no significant improvement in external demand in the first half of 17 years. At the same time, due to the time difference between new and old customers, the reduction in the number of orders has led to a decline in revenue, but as new customer orders are gradually filled, orders are expected to recover and are expected to improve gradually.
The gross profit margin of yarn-dyed fabrics fell slightly in the first half of the year, and the gross profit margin of 17H1 in the long-term upside space dropped by 1.89PCT to 18.21%. This is mainly due to the corresponding increase in unit consumption in the current period of unsaturated yarn-dyed fabric orders, the continued growth of cotton sales business with low gross profit margin, and the impact of rising coal prices on rising costs. Among them, the gross profit margin of the textile and clothing industry decreased 0.33PCT, and then subdivided the products to see that the gross profit margin of yarn-dyed fabric, printed and dyed cloth, and clothing products decreased by 0.18 0.33PCT respectively compared with the same period last year. The gross profit margin of the United States, Europe and other countries decreased by 0.76/0.87/1.44PCT, which is mainly due to the appreciation of the RMB exchange rate under the background of little change in the price of the company's US dollar orders. The decline in domestic gross profit margin 1.66PCT is mainly due to the increase in the proportion of cotton sales and lower overall gross profit margin.
16Q1-17Q2 gross profit margin is 19.10% (+ 0.37PCT), 20.97% (+ 0.37PCT), 24.07% (+ 4.44PCT), 23.40% (- 0.04PCT), 17.66% (- 1.43PCT), 18.66% (- 2.32PCT).
The company's leading product yarn-dyed fabric (17H1 revenue accounts for 44.38%) is greatly affected by exchange rate and cotton price changes. On the one hand, the main raw material is cotton (cost accounts for 55%), on the other hand, yarn-dyed fabric exports account for about 75%. Exchange rate fluctuations will affect gross profit margin and bring exchange gains and losses through RMB-denominated order prices. Cotton prices have not changed much this year. So far, the 328 cotton spot index has risen 0.63% compared with the beginning of 17 years, and we expect that there is a greater probability of stabilizing after that. However, the RMB exchange rate against the US dollar has appreciated by 3.96% compared with the beginning of the year, and the impact on the company is mainly reflected in the order price, currency conversion, income and exchange gains and losses. The gross profit margin of yarn-dyed fabrics has also slightly decreased 0.18PCT in the first half of the year. The current order cycle of the company is about one month, and the order price (in US dollars) has not changed much from the existing orders, so we need to pay attention to the exchange rate trend in the future.
In the long run, we think that there is still room for the company's gross profit margin to go up: 1) the company actively promotes the spot fabric sales model with higher gross profit margin for the existing yarn-dyed fabric business. The increase in the proportion of this model is expected to increase the gross profit margin of yarn-dyed fabrics; 2) the production capacity of clothing, printing and dyeing and other sectors is not yet saturated, and there is room for scale effect and efficiency improvement in the future. 3) the company's overseas production capacity layout is expected to take advantage of its low cost and tariff advantages to achieve a higher gross profit margin.
The upgrading of yarn-dyed fabric model is expected to improve efficiency. Tianxiang and Lincai subsidiaries are expected to reduce losses and improve performance. It is expected that the future increase of Ethiopia capacity investment company lies in: 1) extensive business layout, covering the whole industry chain of gin, spinning, dyeing, weaving, finishing, knitting, home textile, printing and dyeing, clothing, thermoelectricity and sewage treatment, brand operation and warehousing and logistics in one, the whole industry chain operation. The short-term point is that the subsidiary company Tianxiang will make a turnaround this year, and MediaTek will gradually reduce its losses (about 10 million each for 16 years), resulting in an improvement in overall performance. 2) the production capacity of printed and dyed fabric has been released. At present, about 20% of the production capacity will be fully released after processing and conversion to self-order. 3) in the context of relatively saturated production capacity, the increase in the proportion of innovative spot fabric model is expected to lead to an increase in gross profit margin. Spot fabric model is the mode in which the company develops, designs patterns, and then opens order meetings to provide samples for customers to choose from and place orders. Its gross profit margin is about 10PCT higher than order sales, accounting for 10% of the total production capacity of yarn-dyed fabrics and 20% of the future target.
In addition, the company should pay attention to the change of order acceptance mode from OEM to ODM, increase the investment in R & D and design, and improve the added value of products. 4) pay attention to overseas production capacity and business development, on the one hand, increase re-export trade (according to customer requirements, give full play to the company's design advantages, buy fabrics from third parties, and then go to Bangladesh, India and other places to find factories to do OEM, ready-to-wear production directly to customers) business volume And to speed up the pace of investment in Ethiopia in Africa (a textile industrial park with spinning, printing and dyeing, yarn-dyed fabrics and ready-made garments is to be built in December 16, it is expected to form a production scale of 200000 spindles, 2.5 million meters of printing and dyeing fabrics, 2.5 million meters of yarn-dyed fabrics and 3 million pieces of ready-made garments), seizing the foreign middle and low-grade fabric market, the country's production capacity project is expected to start construction at the end of 17 years and reach production in 19 years.
The performance in the first half of the year is greatly affected by exchange rate appreciation, and the advantages of long-term leading and overseas production capacity need to be highlighted. We think: 1) as the global leader of yarn-dyed fabrics (the scale of production capacity is second only to Lutai), the scale effect and technological advantages are relatively obvious. If external demand ushered in the recovery company is expected to be the first to benefit; investment in Ethiopian capacity projects will bring continuous order growth. 2) in the short term, domestic cotton and cotton yarn sales promote income growth, but their contribution to net profit is limited, while RMB appreciation and rising coal prices still bring certain performance pressure; however, the turnround of Lingcai, Tianxiang and other subsidiaries will improve the overall net profit to a certain extent; 3) there are still expectations of mergers and acquisitions in extension, with investment mainly focusing on environmental protection, resources and power. At present, the monetary fund in the account is 416 million yuan + fund and financial management is 876 million yuan.
The company expects net profit growth of-10% to 10% from January to September in 17 years. We continue to be optimistic about the company's leading position in yarn-dyed fabrics and the growth brought about by improved business benefits. Exchange rate appreciation and rising coal costs in the first half of the year had a certain negative impact on performance, and in the short term, we were greatly affected by exchange rate fluctuations, slightly downgrading EPS1.25/1.39/1.56 yuan in 17019, corresponding to PE11 times in 2017, lower valuation and future deposit and extension M & An expectations, "overweight" rating.
Risk tips: the risk of exchange rate fluctuations, weak overseas demand, cotton prices fluctuate greatly.