This report is read as follows:
The company's H1 profits are under pressure, mainly affected by the low-price strategy to strive for orders, in line with the performance pre-reduction announcement; from September to enter the peak season, waiting for demand to gradually recover.
Main points of investment:
Investment suggestion: considering that H1 company's profits are under pressure, we downgrade the 2023-2025 homing net profit forecast to 1.44x236x328 million (before the adjustment, it is 1.74x296), taking into account the company's leading position in the color yarn field, giving the company 19 times higher than the industry average of PE in 2023, lowering the target price to 18.30 yuan, maintaining the "overweight" rating.
H1 profits are under pressure, in line with the performance pre-reduction announcement. The income / return net profit / non-return net profit of H1 company is 1.107 billion yuan respectively, which is + 6.18%, 63.89% and 57.41% respectively compared with the same period last year. Among them, the profit pressure is mainly due to: 1) poor market demand, the company strives for orders through low-price promotion. 2) Cotton prices rose sharply, but did not successfully spread downstream. 3) the company sets aside 27.86 million of the bad debt provision for Xinye textile advance payment.
The sales of H1 increased significantly, and the processing fee decreased. 1) quantity: the output of H1 company is about 37000 tons, an increase of 11% over the same period last year; sales volume is about 38000 tons, an increase of 30% over the same period last year; orders are about 43000 tons, an increase of 39% over the same period last year, of which the orders for new products account for about 8% of the total orders, and the orders are significantly increased. 2) Price: under the low price strategy, we estimate that the processing fee of the company is more than 1000 yuan lower than that of 2022H1, which leads to some pressure on the net profit per ton.
The peak season is approaching and demand is expected to recover. Q2 company sales decline month by month, July is still the off-season of the industry, sales achieved low-unit growth; August sales increased month-on-month, the mid-to late-decade has gradually entered the industry peak season, terminal demand is expected to gradually recover. In terms of price, the new product company will still use low-price strategy to open the market space; for hosiery yarn, the industry is accelerating clearance, with the recovery of demand, the company will gradually raise prices, profitability is expected to repair.
Risk hint: net profit per ton improved less than expected, demand recovery was less than expected