Incident Overview
In 2023, the company's revenue/net profit attributable to mother, net profit after deducting non-attributable net profit/net operating cash flow were RMB 25.11/1.04/0.84/0.72 billion, respectively, up 13.73%/-35.90%/-29.79%/-56.18% year-on-year. The decline in net profit is mainly due to the fact that the price of the company's dyeing and processing fees has not recovered since the price of dyeing and processing fees was drastically lowered in the second half of 2022, leading to a decline in net profit per ton (net profit of 1,282 yuan), as well as bad debt preparation for “Henan Xinye” of 23Q2 of 221 million yuan. Excluding the impact of credit impairment on net profit of -22.2% year-on-year. The net profit and loss of fair value from financial assets and liabilities was +685% year-on-year to $0.24 billion; operating cash flow was lower than net profit to mother mainly due to an increase in inventory.
2023Q4 Company's revenue/net profit attributable to mothers/net profit after deduction of non-attributable net profit/net operating cash flow were 6.98/0.33/0.25/ -0.19 billion yuan, respectively, up 18.42%/42.50%/23.98%/-114.89% year-on-year.
The company paid a dividend of 0.15 yuan per share, with a dividend rate of 21.51% (20.69% in '22), corresponding to a dividend rate of 1.1%.
On 2024/2/7, the company announced plans to increase its holdings. It is planned that Mr. Ho Peifu/Ms Ho Biying will increase their share holdings by 5 to 7 million yuan/2 to 3 million yuan. As of 2024/3/26, Mr. He Peifu had increased his holdings by 543,000 shares, with a total increase of 5.9 million yuan. Based on this, the average cost of increasing holdings was estimated at 10.86 yuan; Ms. He Biying increased her holdings by 243,000 shares, with a total increase of 2.62 million yuan. Based on this analysis, the average increase cost was 10.79 yuan. Analysis and judgment:
Prices are being pressured by sluggish demand, and revenue growth comes from volume growth. (1) The company's revenue from the colored yarn/trade yarn/processing fee business in 23 years was 2,217/1.77/088 million yuan, respectively; (2) Looking at volume and price splitting, colored yarn/processed yarn production increased 14%/60% year on year, colored yarn sales increased 11.29% year on year to 74,900 tons, launch unit price increased 1% year on year to 29,600 yuan; processed yarn sales increased 57.10% year on year to 106,000 tons year on year. 3) Domestic/foreign revenue increased by 12.92%/23.11% year-on-year, that is, domestic/export revenue was 24.72/10 billion yuan respectively. (4) Looking at the split quarter, net profit for Q1/2/3/4 after deducting non-credit (credit impairment) tons was 1122/1580/1077/1126 yuan, respectively.
Gross margin declined due to unrecovered processing fees. The decline in net interest rate was higher than gross margin mainly due to increased credit impairment losses and increased expense rates. 1) The company's gross margin in '23 was 11.49%, down 0.3 PCT year on year, mainly because the company's processing fees have not recovered since the adjustment in the second half of 2022. The gross margin of colored yarn/trade yarn/processing business in '23 was 11.79%/3.59%/19%, respectively, down 0.19/0.55/ -1.37PCT year on year. 2) The company's net interest rate/deducted non-net interest rate in '23 was 4.16%/3.33%, respectively, down 3.22/2.06PCT. Judging from the expense ratio, the 23 sales/management/R&D/finance expense ratios were 0.56%/2.27%/3.61%/0.20%, respectively, up 0.03/0.31/0.38/0.66PCT. The increase in the financial expense ratio was mainly due to declining interest income and exchange rate fluctuations, and net exchange losses increased by $0.06 million; the increase in management expenses ratio was mainly due to employee compensation, depreciation and amortization Increased costs. Credit impairment loss/revenue increased by 0.9 PCT to 0.86% year over year, mainly due to bad debt provision for prepaid accounts from Henan Xinye. The share of non-operating income decreased by 2.25 PCT year on year, mainly due to government subsidies falling 94% to 0.03 billion yuan; the share of non-operating expenses decreased by 0.4 PCT year on year; the share of fair value change income increased by 0.57 PCT year on year, mainly due to the increase in fair value variable income from financial instruments; the share of investment income and other income increased 0.53 PCT to 0.37% year on year; tax and additional share was +0.15 PCT; income tax/revenue decreased 0.36 PCT to 0.50% year on year. 3) The 23Q4 company's gross margin/net interest/deducted non-net interest rate was 11.33%/4.68%/3.53%, up 3.74/0.79/0.16PCT year on year. The total cost ratio for the period increased 4.41 PCT, and credit impairment loss/revenue increased 0.31 PCT year on year; net gain/revenue from changes in fair value increased 1.73 PCT year on year; the share of other income increased 1.0 PCT year on year; income tax/revenue increased by 1.16 PCT year on year.
Follow the company's inventory removal progress. The company's inventory in '23 was 640 million yuan, up 82.22% year on year and 6.3% month on month. Among them, raw materials/in-products/finished products accounted for 49%/5%/46%, up 6/1/-7PCT year on year. The number of inventory turnover days was 83 days, an increase of 13 days over the previous year. The company's accounts receivable were 21 million yuan, a year-on-year decrease of 7.58%. The average number of accounts receivable turnover days was 3 days, a year-on-year decrease of 1 day. The company's accounts payable were 190 million yuan, up 159.18% year on year. The average number of accounts payable turnover days was 47 days, an increase of 15 days year on year.
Investment advice
According to our analysis, (1) in the short term, the 30,000 ton tube yarn project in Jingzhou, Hubei began operation in October 23, contributing 55 million yuan in revenue in 23 years. With the completion and commissioning of the Hubei Jingzhou project, it is expected to lead to capacity expansion in 24; (2) the company is expected to recover in terms of strengthening cost control, hedging operations, and fixed cost amortization driven by volume growth. Maintain the 24/25 revenue forecast of $3,09/5,083 billion yuan, respectively; maintain the 24-year net profit forecast of 234/330 million yuan; maintain the 24-year net profit forecast of 234/330 million yuan, corresponding to maintaining the 24-year EPS forecast of 1.56/2.20 yuan, maintain the 24-year EPS forecast of 1.56/2.20 yuan, add the 26-year EPS forecast of 2.65 yuan, and the closing price of 13.64 yuan on March 25, 2024. The corresponding PE was 9/6/5X, maintaining the “buy” evaluation grade.
Risk warning
Risk of fluctuations in raw material prices; risk that production progress does not meet expectations; systemic risk.