Brief comment on performance
The company released its quarterly report for 22 years, with a revenue of 13.302 billion yuan (+ 4.6%) and a net profit of 300 million yuan (- 32.5%). Single Q3 realized revenue of 4.766 billion yuan (+ 14.6%) and net profit of 8.0539 million yuan (- 94.4%), in line with expectations.
Business analysis
Weak demand is a drag on the yarn business and steady progress in terms of production capacity. For sub-business, the Q1-3 yarn / net chain / hosiery industry is expected to achieve revenue of about 450.85 billion yuan respectively, which is-15.7%, 18.4%, 65.4%, respectively, compared with the same period last year. Due to the repeated domestic epidemic and the slowdown in overseas clothing consumer demand, the main color spinning orders are under pressure, and the hosiery industry is progressing smoothly. The transformation of production capacity strategy continues to move forward. By the end of 3Q22, the company is expected to have 2.06 million spindles of yarn capacity (1770.290,000 domestic / overseas respectively). The Anhui Huaibei 200,000 spindle production project is progressing smoothly, of which 100,000 spindles are expected to start production by the end of this year. Under the influence of the epidemic, the Aksu plant in Xinjiang was suspended, but thanks to the digital transformation of the plant to improve quality and efficiency, the overall capacity utilization is expected to be the same as in the first half of the year.
The gross and net interest rates are under pressure periodically. Q1-3 company gross profit margin is 7.29%, down 0.9 Pct; single Q3 gross profit margin is 4.15%, year-on-year / month-on-month decline of 4.8 / 3.7 Pct, mainly due to the downward price of raw materials, while the previous rolling digestion of high-priced inventory led to pricing and cost changes misplaced. Q1-3 company net interest rate is 2.26% (- 1.24 Pct), of which Q3 net interest rate is 0.17% (- 3.28 Pct) and month-on-month-3.08Pct, short-term profitability has declined.
Inventory situation improved, operating net cash flow decreased. As of the end of 3Q22, the company's inventory balance was 4.344 billion yuan, a decrease of 33.8% compared with the beginning of the year, mainly due to net chain cotton inventory clearance; the net operating cash flow in the first three quarters was 1.362 billion yuan, down 50.12% from the same period last year, of which cash received from sales goods decreased by 5.4% compared with the same period last year, reflecting a decline in the ability to recover money from recent sales.
Investment suggestion
The company's color spinning main business customer structure continues to optimize, superimposed digital reform to improve efficiency, outstanding leading edge, at the same time, it is expected that the back-end network chain business will maintain rapid growth and promote overall performance. Taking into account the overall pressure on the downstream consumer environment, downgrade the profit forecast, the company is expected to return to the mother of the net profit of 44998 million yuan in 22-24, corresponding to the PE of 12-8-6 times, maintaining the "buy" rating.
Risk hint
Terminal demand is not up to expectations, RMB exchange rate fluctuations and so on.