1Q24 results were higher than our expectations
The company announced 1Q24 results: revenue of 801 million yuan, +14.8% year on year; net profit to mother of 78 million yuan, 45.2% year on year, after deducting non-net profit of 75 million yuan, +46.1% year on year. The results were higher than our expectations, mainly due to lower financial expense ratios.
All categories have grown by over double digits, and the domestic market's performance is superior to that of overseas markets. 1Q24 The company's order growth trend continues, and we expect the company's revenue from the three major categories of zippers, buttons, and webbing to achieve double-digit growth or higher. Among them, because webbing is still small, we expect its revenue growth rate to exceed 20%; due to its rich materials and products, the revenue of buttons may increase slightly faster than zippers over the same period last year. By region, we expect both domestic and overseas markets to achieve good year-on-year revenue growth in 1Q24, and the recovery of orders from brands in China is even more obvious.
Exchange and interest income led to a decrease in financial expense ratios and an increase in overall profitability. The gross margin of the 1Q24 company was relatively stable, +0.2ppt to 37.9% year-on-year. In terms of expenses, the 1Q24 company's financial expense ratio was -2.8ppt to -0.4% year-on-year. On the one hand, it benefited from exchange contributions, and on the other hand, interest income increased and loans decreased due to the receipt of funds raised. Other expenses are relatively stable, with sales expenses -0.4ppt to 9.5% year-on-year, and management and R&D expenses rates of +0.5 and +0.4ppt to 13% and 4.5%, respectively. Overall, the company's net profit to mother was +2ppt to 9.7% year-on-year.
The overall operation is steady, and the cash flow is healthy and abundant. The company's 1Q24 inventory size was +13.9% year-on-year to 734 million yuan, matching the growth rate with revenue. The number of inventory turnover days and the number of accounts receivable turnover days were 4 days, 1 day to 121 days, and 48 days, respectively, and operational efficiency was improving steadily. In addition, the company's net cash flow from operating activities increased more than in the same period last year, +1066.6% to 94 million yuan over the same period last year, and monetary capital +11.7% to 581 million yuan over the same period last year, with abundant cash.
Development trends
On the demand side, we expect 2Q24 orders to continue the 1Q24 double-digit year-on-year growth trend, while the company is confident in its annual revenue target of 4.5 billion yuan. In March 2024, the company's Vietnam factory was put into operation, mainly zippers and metal buttons. The company said it is expected to serve more sports brand customers and differentiate it from the fast fashion brands with multiple services in the former Bangladesh factory, which will help the company further enhance its competitive advantage in overseas markets.
Profit forecasting and valuation
Our net profit for 2024 and 2025 remains unchanged at 640 million yuan, and the current stock price corresponding to 2024/25 P/E is 22.2x/19.2x, respectively. We keep our outperforming industry rating and target price of 13.5 yuan unchanged. The corresponding 2024 and 2025 P/E is 24.7x/21.3x, respectively, with 12.5% upside compared to the current stock price.
risks
The recovery of the company's orders fell short of expectations, the expansion of new brand customers slowed, the risk of exchange rate fluctuations, and the rise in new production capacity affected the company's overall profitability.