Fabric printing and dyeing established enterprises, gold OEM wholesale driven rapid revenue growth. The company is an established enterprise of fabric printing and dyeing, which has expanded to gold OEM wholesale since 2018. 2017-22 revenue and return net profit CAGR were 6.6% and 2.0%. The high revenue increase in 2021 is mainly due to the company seizing the recovery of jewelry consumption, stable gold prices and structural growth opportunities for gold categories to expand wholesale business. Printing and dyeing steady growth, gross profit margin continues to lead the industry, gold wholesale through low gross margin volume, good cost control, stable turnover.

Textile printing and dyeing: under the optimization of the industry pattern, the output increases steadily with the advantage of low-carbon environmental protection production. Textile printing and dyeing processing is located in the middle reaches. According to the Bureau of Statistics, the revenue of printing and dyeing enterprises above scale in 2022 is about 312.5 billion yuan, and the degree of concentration is relatively low. It is estimated that the company's market share in 2022 is about 1.3%. After the 13th five-year Plan, the environmental protection policy will strictly eliminate backward production capacity and accelerate the optimization of the pattern. High-quality enterprises have carried out technological transformation to increase their production capacity, and the total production capacity and exports of the industry have increased steadily, with CAGR reaching 1.3% and 5.1% in 2015-22. The fabric printing and dyeing OEM model adopted by the company has advantages in inventory, turnover and dealing with exchange rate risks. The company's output CAGR reached 4.3% in 2018-22, and it is expected that with high-quality production capacity, output growth will continue to be higher than that of the industry. Since its inception, the company has treated more than 60,000 tons of sewage treatment plants and industrial water supply plants, and the gross profit rate of printing and dyeing has been higher than that of fabric printing and dyeing companies. Since 2018, the gross profit margin has been affected by the rising costs of coal, industrial electricity consumption and sewage treatment in Zhejiang Province. It is expected that with the fall of coal prices, the product structure will be optimized and the future will be stable and better.

Gold jewelry wholesale: to undertake the recovery of demand in the short term and benefit from the structural growth of gold category in the medium and long term.

In 2022, the size of the gold jewelry market was 410 billion yuan, with a CAGR2 of 9.8%, higher than the average growth rate of the jewelry industry. Process upgrading, gold price fluctuations in the upward context to satisfy their own demand or drive consumption frequency to increase.

The company's gold business sales in 2021 and 22 increased by 74.4% and 4.0% respectively compared with the same period last year. It is expected that as gold prices fluctuate upward and gold jewelry consumption continues to pick up, gold business gross profit margin may gradually stabilize. From January to May 2023, the total amount of gold, silver and jewelry in China increased by 19.5% compared with the same period last year. The company's gold processing volume in East China market first, the country's top three, or fully benefit from the backlog of demand release and medium-and long-term category structural growth.

Investment advice. As an established enterprise of fabric printing and dyeing, the company has a sound main business and a leading profit level. Under the background of pattern optimization, printing and dyeing output may increase steadily. Since the beginning of the year, the recovery of gold jewelry consumption has exceeded expectations, the company's gold jewelry processing volume of the top three, short-term or undertake the release of backlog demand, medium-term or continue to benefit from category structural growth. It is estimated that the net profit of 2023-25 is 8.0,9.2 and 1.03 billion yuan, and the corresponding share price PE is 11,9 and 8 times, giving a "buy" rating for the first time.

Risk hint. Energy prices fluctuated sharply, gold prices fluctuated sharply, and gold jewelry consumption growth fell short of expectations.