This report is read as follows:

As a high-quality wool textile enterprise, the company has a complete industrial chain and overseas high-quality customer resources, outstanding R & D capabilities, recent acquisitions to accelerate the layout of downstream brand clothing, the first coverage to carefully increase the rating.

Main points of investment:

For the first time, coverage gives a cautious overweight rating. As the leader of the wool textile industry, the company has accelerated the layout of downstream brand clothing in recent years, the multi-brand matrix has become increasingly rich, and the space for long-term growth has been opened. It is estimated that the EPS from 2019 to 2021 will be 0.57, 0.65 and 0.72 yuan respectively, with a target price of 10.26 yuan, corresponding to 18 times PE in 2019, which will be cautiously overrated for the first time.

With the high growth of 2019H1 performance, wool spinning leader is moving towards a new pattern. The company is deeply engaged in the field of worsted fabric, forming two complete industrial chains of cotton spinning and woolen spinning, occupying the high-end market for a long time. With the extension of the company's business to the lower reaches of the industrial chain and the continuous expansion of revenue scale, 2019H1's net profit increased by 50% Mel 90% compared with the same period last year, and its performance improved significantly and stepped onto the upward track.

Science and technology help to enhance the competitiveness of products and grasp international high-quality customers. In terms of internationalization, the company accounts for a relatively high proportion of overseas income, the scope of business covers six continents, and its products have passed a number of European and American quality recognition. In the future, we plan to increase the expansion of overseas high-quality customers and actively enhance the impression and positioning of our products in the international market. The company pays attention to scientific research and innovation, increases R & D investment, and continues to develop high-tech content and high value-added products to drive sustainable growth.

The layout of brand clothing is accelerated, opening up the space for performance growth. Through mergers and acquisitions, the company has entered the field of downstream brand clothing, pulling up the scale of sales, and the proportion of clothing business income has gradually increased. French clothing group SMCP after the acquisition of revenue and profit growth, the operation of its three major brands are improving, win-win cooperation and shared growth. With the continuous acquisition of international high-end clothing in 2019, the brand matrix is further enriched, multi-brand synergy is worth looking forward to, and there is a broad space for growth in the future.

Risk hint: clothing consumption is not as expected, new brand operation is not as expected, and overseas sales are not as expected.