Under the influence of demand pressure and cotton price decline, the company's 3Q22 revenue / net profit / deduction of non-net profit year-on-year-2.0% Universe 65.8% Universe 64.3%. In the short term, no significant recovery signal has been observed on the demand side, superimposed by the downward pressure on domestic cotton prices and the company's high 4Q21 base, the company's 4Q22 performance is expected to be under pressure. In the medium and long term, the short-term demand-side disturbance or accelerate the clearing and pattern optimization of small and medium-sized production capacity in the industry, the company's long-term competitive advantage is expected to be further consolidated, and future growth is expected.
Revenue side: short-term demand pressure still exists, Q3 revenue fell slightly compared with the same period last year. The company's 1-3Q22 revenue is 1.62 billion yuan / + 7.04%, of which Q3 single-quarter revenue reaches 570 million yuan /-2.02%. From a split point of view, we believe that the decline in Q3 revenue is mainly due to price and sales fluctuations caused by weak demand. The price range of 3Q22 cotton is 14000-20000 yuan / ton, while the price of 3Q21 is 16000-20000 yuan / ton over the same period.
Profit side: price decline-weak demand leads to fluctuations in profitability. 1) gross margin: company 1-3Q22 gross profit margin is 13.32%/-5.65pcts, in which 3Q22 gross profit margin is 10.01%/-7.56pcts, quarter-to-5.62pcts.
We believe that the decline in gross profit margin is mainly due to: a. Cotton yarn prices are in the upward cycle in the same period in 2021, and the company has a certain inventory income, while cotton yarn prices have fluctuated downwards since March 2022, and related revenue has decreased compared with the same period last year; b.1-3Q22 energy costs have increased year-on-year; c. Short-term market demand is weak, the company cut the price of some products.
2) fees: the sales / management / R & D expenses of company 1-3Q22 are RMB 53.53 million, which is RMB 53.53 million, which is + 23.8%, 0.2%, 5.7%, 0.6%, 2.1%, 3.3%, respectively, year-on-year + 0.1pct/-0.1pct/, and the overall expense rate is stable. 3) profit: the net profit of company 1-3Q22 is RMB 140 million /-13.8%, the net profit of non-parent is RMB 100 million /-35.8%, and the net profit margin of non-parent is 6.2%/-4.2pcts. Among them, the non-return net profit deducted by 3Q22 is 2033 million yuan /-64.3%, and the profit margin is 3.6%/-6.2pcts.
Looking to the future: short-term pressure is still expected, long-term pattern optimization & capacity release to drive growth. In the short term, no significant recovery signal has been observed on the demand side, superimposed by the downward pressure on domestic cotton prices and the company's high 4Q21 base, the company's 4Q22 performance is expected to be under pressure. In the medium and long term, the disturbance on the short-term demand side may accelerate the clearing and pattern optimization of small and medium-sized production capacity in the industry. The company's new production capacity is scheduled to be put into production at the beginning of 2023, which is expected to accelerate share expansion in the stage of demand recovery and industry clearing, while the completion of the upstream 40,000 ton spinning project is also expected to help further reduce costs and optimize production efficiency. and the company's long-term competitive advantage is expected to be further consolidated, and future growth is expected.
Risk factors: raw material price fluctuation risk; downstream demand fluctuation risk; industry small and medium-sized capacity clearing progress is not as expected risk and capacity release is not as expected risk.
Investment advice: in view of the continued pressure on the short-term demand side, the company's net profit forecast for 2022-24 is reduced to 174x223pm 296 million (the original forecast is 2171,374 million). Combined with the valuation level of the industry comparable company in 2022 (14 times PE of Taihua New Materials and 18 times PE of Weixing shares, based on the unanimous expectation of wind), the company is given 15 times PE in 2022, corresponding to the target price of 21 yuan. Consider the short-term demand-side pressure, downgrade the company's rating to "overweight" rating.