In 1919, income fell by 6%, net profit remained flat, 20Q1 income declined slightly, and net profit contributed by investment income increased significantly.

In 2019, the company achieved operating income of 3.911 billion yuan, down 6.19% from the same period last year, and its net profit was 393 million yuan, up 0.70% from the same period last year. It deducted 308 million yuan from non-parent net profit, down 7.77% EPS1.17 yuan from the same period last year, and planned to pay a dividend of 0.20 yuan per share (including tax). Among the non-recurrent gains and losses, the investment income of financial assets increased more, from 27.99 million yuan in 18 years to 91.14 million yuan.

On a quarterly basis, 19Q1-Q4 revenue increased by-8.05%,-17.60%,-4.95% and + 8.20%, respectively, and net profit increased by + 63.47%, + 5.19%,-35.37% and + 7.71%, respectively. 20Q1 income fell 2.6% year-on-year to 901 million yuan, net profit increased 54.65% to 113 million yuan, and net increase of 40.05 million yuan was mainly contributed by a net increase of 86.07 million yuan in investment income (net investment income + fair value change income) of financial assets, while non-net profit decreased by 53.92% to 16.16 million yuan. To sum up, poor internal and external demand in the first three quarters of 1919 led to a decline in income, 19Q4 slightly improved, 20Q1 affected by the epidemic at home and abroad, income declined again compared with the same period last year; net profit side investment income increased performance, if deducted this impact on profitability also exists pressure.

Revenue split in 1919: revenue from major products declined, but from a regional point of view, domestic income increased slightly and foreign income declined.

1) from a sub-industry point of view, in 2019, textile and clothing revenue accounted for 72.95%, with revenue down 13.08% from the same period last year; in addition, thermoelectricity and other (mainly cotton sales) accounted for 2.08% and 24.97%, respectively, compared with the same period last year. + 16.89%, + 19.51% respectively.

2) in terms of sub-products, the company's main products are yarn-dyed fabrics (35.05% of revenue), printed and dyed fabrics (17.19%), cotton yarn (9.77%) and clothing (7.72%). In 19 years, the revenue increased by-16.27%,-6.36% and-18.92% respectively, while printed fabric, electric steam and sewage treatment accounted for a relatively small proportion, and the income increased by 130.95% and 16.89% respectively.

Then split according to volume and price, in 2019, the sales volume of yarn-dyed fabrics, printed fabrics, printed fabrics, clothing and cotton yarn increased by-20.22%,-14.72%,-3.67%,-17.79% and-27.70%, respectively, and the estimated unit prices increased by 4.95%, 9.80%, 139.75%,-8.48% and 12.14%, respectively.

3) from a regional point of view, domestic growth was year-on-year in 19 years, while income in major foreign countries decreased compared with the same period last year, of which domestic income accounted for 50.96%, up 5.47% from the same period last year. The United States and Europe accounted for a relatively large proportion of total income (17.22% and 12.70%, respectively). Revenue was-14.81% and-17.33%, respectively, while Japan accounted for 1.08% and 15.19%, respectively. Others accounted for 18.04%, down 17.15% from the same period last year.

Gross profit margin increased in 1919, while gross profit margin of 20Q1 decreased slightly.

In 19 years, the company's gross profit margin rose 1.29PCT to 21.63% compared with the same period last year. In terms of products, the gross profit margins of yarn-dyed, printed and dyed fabrics and other products are 30.26% (+ 4.19PCT), 28.25% (+ 5.53PCT) and 9.35% (- 1.06PCT), respectively.

19Q1~20Q1 's single-quarter gross profit margin is 17.03% (+ 3.01PCT), 21.26% (+ 3.31PCT), 21.30% (- 0.60PCT), 26.15% (- 1.73PCT) and 16.36% (- 0.94PCT) respectively.

The main factors affecting the increase in the company's gross profit margin in 19 years include:

1) the price of raw material cotton has dropped, and the cost of using cotton has dropped. Raw materials account for about 60% of the company's costs, mainly cotton. In 2019, the spot price index of domestic 328 cotton fell 11.50% to 13601 yuan / ton, and the foreign Cotlook A cotton price index fell 3.71% for the whole of 19 years. The company's product exports are dominant, and the order prices are mostly higher than those of out-of-standard cotton. The price of internal cotton is lower than that of foreign cotton, which contributes to the company's gross profit margin.

2) contribution of exchange rate depreciation. The company's main product exports accounted for about 65%, and the 19Q1~20Q1 RMB appreciated by 1.89%, 2.10%, 2.88%, 1.37% and 1.56% against the US dollar, respectively, and depreciated in each quarter compared with the same period last year, which is conducive to the increase in income and gross profit margin from the price of US dollar orders to RMB.

3) in addition, the cost of some fuels such as electricity and coal has also decreased.

20Q1 gross margin fell slightly compared with the same period last year. Looking forward to the past 20 years, under the background of the sharp contraction of demand caused by the foreign epidemic and the great suppression of company orders, there is downward pressure on the gross profit margin.

With the increase of expense rate, the return on investment of financial assets makes a greater contribution.

In terms of expense rate, the company's expense rate during 2019 was 9.84%, an increase of 1.79PCT over the same period last year. The expense rates of sales, management, R & D and financial expenses continued to increase from-0.13,0.86, + 0.64 and + 0.41 PCT to 12.14% respectively during the 20Q1 period, with sales, management, R & D and financial expense rates of + 0.75, + 0.40, + 1.65 and-1.41PCT, respectively.

In addition, the investment income of financial assets made a great contribution to the company's performance, with a total net increase of 51.26 million yuan in 19-year investment income + fair value change income, a year-on-year increase of 124.99%, a net increase of 86.07 million yuan, and a net increase of 205.76% over the same period last year.

20 years of foreign epidemic situation caused external pressure, long-term attention to the steady development of yarn-dyed leading companies with gin, spinning, dyeing, weaving, finishing, knitting, home textile, printing and dyeing, clothing industry chain, thermoelectricity, sewage treatment, brand operation and warehousing logistics in one, the current spinning scale of 320,000 spindles Annual production capacity of 160 million meters of yarn-dyed fabrics, 60 million meters of printed and dyed fabrics, 11 million pieces of clothing, 6000 tons of knitted yarn and knitted fabrics, and 72 million meters of home textiles. At present, the production capacity projects under construction mainly include Xinjiang high-grade home textile grey cloth and supporting yarn production project and Indonesia annual production of 66 million meters high-grade woven fabric project, of which Xinjiang project is the company's home textile business supporting, in 1920 successively put into production, the progress of Indonesia project is relatively slow.

We believe that: 1) due to the influence of the external environment, the current epidemic situation in foreign countries has not yet appeared an inflection point, and the uncertainty of external demand is relatively large. From January to March in 20 years, the export volume of textiles and clothing fell by 14.6% and 20.6% respectively, and the textile and clothing export environment is under pressure. it is difficult for the company to be alone. At the level of the company's consolidated statement, export income in the past 19 years accounted for 49%, exports of major products accounted for about 65%, and the United States and Europe accounted for 61% of the export income. At present, the epidemic in this region is still relatively serious, which has adversely affected the company's export orders. Since the end of March, some orders have been cancelled or delayed. At present, it is still necessary to observe the progress of epidemic prevention and control abroad and the recovery of external demand, and there is a great pressure on short-term performance in the past 20 years.

2) in the medium and long term, the company plays a leading role in yarn-dyed manufacturing, and has experienced the intensification of survival of the fittest in the epidemic industry. As a leader, the company has relatively strong anti-risk ability and is expected to increase its share.

The company's industry status and long-term logic of development have not changed for the time being, while maintaining a high dividend payout rate (about 6% in 18-19 years). However, considering the great suppression of the external demand of the epidemic in the past 20 years, there is pressure on both the foreign economy and the demand side, and the EPS for 20 years and 22 years is 0.77,0.85,0.96 yuan, corresponding to 20-year PE12 times, and the short-term performance end is under some pressure, which is downgraded to "neutral" rating.

Risk hints: the impact of the epidemic in foreign countries has exceeded expectations, resulting in worsening orders, less than expected production capacity expansion, cotton price fluctuation risk, exchange rate fluctuation risk.