Core views:

The company announced the three-quarter report for 2023. 2023Q1-3 achieved revenue of 7.333 billion yuan, -2.64% year-on-year, net profit of 452 million yuan, +1.66% year-on-year, net profit of 415 million yuan after deducting non-return net profit of 415 million yuan, +11.01% year-on-year. 23Q3 achieved revenue of 2,660 billion yuan, -15.89% year-on-year, net profit of 172 million yuan, +1.87%, net profit of 157 million yuan, net profit of 157 million yuan, and -0.08% year-on-year. The decline in Q3 revenue is expected to be mainly affected by high gold prices, and the gold jewelry processing business has declined.

Profitability improved, and period expenses were well controlled. The gross margin/net profit/net profit margin of the 2023Q1-3 company was 13.05%/6.94%/5.66%, year-on-year +1.20/0.29/0.69pct; sales/management/R&D/financial expenses ratio 1.10%/2.10%/2.06%/-0.31%, year-on-year +0.06/0.10/0.07/-0.09pct. 23Q3 sales gross margin/net margin was 10.46%/7.31%, year-on-year -0.71/+1.23pct.

The 2023H1 printing and dyeing industry continued to be at a low level, showing a trend of restoration and improvement compared to Q1. According to data from the National Bureau of Statistics, in 2023H1, the total operating income/profit of printing and dyeing enterprises above scale was 1364.65/3,937 billion yuan, -3.28%/-24.34% year-on-year, and the decline was 0.90/12.33pct narrower than 23Q1.

It is expected that the gold jewelry business will be affected by the continued high price of gold, and the growth rate will decline. According to statistics from the China Gold Association, in 2023Q1-3, the national gold consumption was 835.07 tons, +7.32%, gold jewelry 552.04 tons, +5.72% year-on-year, of which Q3 national gold consumption was 280.19 tons, -7.00%, gold jewelry 183.78 tons, and -8.76% year on year. The obvious decline in growth was mainly due to the fact that gold prices in Q3 continued to be high. As the end of September neared the “double festival”, gold prices fluctuated sharply, and wait-and-see sentiment in gold jewelry consumption increased.

Profit forecasts and investment advice. The 2023-2025 EPS is expected to be 0.67 yuan/share, 0.77 yuan/share, and 0.89 yuan/share, respectively. The company will continue to adhere to the dual main business of “textile printing and dyeing+gold jewelry”. Referring to the average PE and comparable company valuations in the past three years, the company gave 12 times PE in 2024, corresponding to a reasonable value of 9.28 yuan/share, maintaining a “buy” rating.

Risk warning. The risk of raw material fluctuations, the risk of intense market competition, and the risk of sluggish demand.