Core views:

The company announced its annual report for the year 23, and ultra-high fiber revenue growth was high. According to the company's financial report, the company's revenue in '23 was 1,600 billion yuan, a year-on-year change of -2.05%, and net profit to mother was 203 million yuan, a year-on-year change of +8.53%. It is planned to distribute a cash dividend of 0.17 yuan per share. In terms of revenue by product, worsted wool was -0.18% (volume/price ratio -1.27%/+1.10%, capacity utilization rate +3.66pct to 91.03% year over year), -16.22% (mainly due to external demand pressure, some ordered products not reached the delivery date, and according to investor relations announcements, the company actively adjusted the product/customer structure, and suit/shirt sales volume was -18.69%/-21.11% year-on-year, respectively), and capacity utilization rates were -0.81pct to 106.28%/106.28%, respectively 4.68pct to 103.25%), ultra-high fiber +363.22% (mainly ultra-high fiber phase II with a production capacity of 3,000 tons put into operation, volume/price +438.98%/-14.06% year-on-year, respectively, capacity utilization rate +54.13pct to 103.13% year over year).

The proportion of high value-added products increased, and profitability improved. According to the company's financial report, the company's gross margin for 23 years was 34.65%, +1.12pct. Among them, the gross margin for worsted wool/clothes/ultra-high fiber products was +0.26pct/3.71pct/3.98pct, respectively. According to the investor relations announcement, it was mainly an increase in the share of high-value-added products. Gross margin is expected to continue to improve in 24 years as ultra-high second-phase production capacity climbs.

We are optimistic about the company's 24-year performance outlook. According to the company's investor relations announcement, in the worsted fleece business, the 24Q1 company had sufficient orders, and foreign trade improved significantly compared to 23Q4. The company expects to maintain smooth operation after the technical reform is completed; in the clothing business, the company actively adjusts the product/customer structure and orders are of high quality; in the new materials business, the production capacity of the Phase II project is gradually climbing, and the nylon project equipment is entering the factory one after another. In addition, the company completed the intelligent transformation project by the end of 23 and is expected to be produced/sold in 24 The product structure has been upgraded, Subsequent capital expenditure was mainly concentrated on nylon projects.

Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 0.69/0.79/0.92 yuan/share, respectively. Referring to comparable company valuations, it maintains a reasonable value of 12.61 yuan, corresponding to a price-earnings ratio of about 18 times over 24 years, maintaining a “buy” rating.

Risk warning. Risks such as fluctuations in raw material prices, increased market competition, and exchange rate fluctuations.