Main points of investment
The elasticity of the yarn business is remarkable, and the company's performance has reached an all-time high.
Tianhong Textile released its 21H semi-annual report. The company recorded an income of 12.5 billion (+ 52.5%) and a record high net profit of 1.29 billion. Under excellent performance, the company announced a dividend of HK $0.50 per share, a dividend rate of 30%, and a semi-annual dividend yield of 4.4%.
Under the rapid recovery of the sharp rise in 21H1 cotton prices and the rapid recovery of demand, the company's capacity expansion over the past three years has finally been brought into full play. Not only the sales volume of 21H1 yarn business has increased by 38% to 417000 tons, the unit price of yarn products has also increased by 15% to 23700 yuan / ton, and the gross profit margin of yarn business has greatly increased 13.2pct to 23.8%.
With the high growth of H1, we expect the company's sales plan of 840000 tons (+ 12%) at the beginning of the year to exceed expectations. At the same time, in the context of carbon neutrality, the company is also working hard to become the leader of sustainable textile production, and the asset-liability ratio has been significantly improved and the downstream business has also fully benefited from demand recovery. the increase in gross profit margin reflects the effect of integration. The 21H1 revenue of the downstream business increased by 34% to 2.65 billion, and the gross profit margin increased by Spct to 19%. It is worth mentioning that the gross profit of the grey cloth business increased by 22.6pct to 31.8%, which fully demonstrated the results of the integration of the company's grey cloth and yarn production. At the same time, the company's woven and knitted fabric revenue increased by 47%, while the gross profit margin also improved 1.7pct and 3.7pct, respectively.
The company's asset-liability structure has improved significantly. The high performance elasticity brought by cotton price makes the company's operating cash flow reach 2.23 billion (+ 67%) at 21H. Under the high performance elasticity, the company takes the opportunity to further reduce its debt ratio. Compared with the end of 20 years, Tianhong's short-term borrowing fell by 860 million / long-term borrowing fell by 120 million, and the debt-to-equity ratio fell sharply to 0.67 from 0.9 at the end of 20 years. The decline in debt caused the company's interest expenses to fall by 54% compared with the same period last year.
This lays a solid foundation for the long-term, healthy and stable development of the company in the future.
Profit forecast and valuation
We believe that the explosive growth of 21H1 fully demonstrates the company's absolute leading position in the field of functional yarn. At the same time, the improvement of gross profit margin brought about by integration is also gradually emerging. More importantly, the explosive performance growth in 21 years is expected to help the company improve its balance sheet structure in an all-round way and lay a solid foundation for healthy growth in the future. Based on the high growth of 21H1, we continue to raise our profit forecast. It is estimated that the net profit for 21-23 years is 21.8 / 2.52 billion, corresponding to a valuation of 4.1max. 4.03.5. For the absolute leader of the textile industry like the company, such valuations are at a relatively low point in history, maintaining a "buy" rating!
Risk hint: the epidemic worsened more than expected, and terminal demand picked up less than expected.