Key points of investment
The company announced its 2024 quarterly report: revenue of 80 million yuan/yoy +14.83%, net profit to mother of 77.92 million yuan/yoy +45.25%. Revenue continued the positive order trend since 23Q2, achieved steady double-digit growth, and net profit to mother increased sharply, mainly benefiting from the depreciation of the RMB exchange rate and the increase in exchange benefits+interest income, which led to a 2.84 pct year-on-year decrease in financial expenses.
Revenue in all categories bucked the trend in '23, and gross margin increased. 1) By product, revenue from zippers/buttons/other accessories in '23 was +6.82%/+8.79%, respectively, and revenue accounted for 55%/41%/3%, respectively. Revenue achieved contrarian growth in the downstream customer inventory cycle, and continued to fulfill the logic of increasing market share as the company's competitive advantage was highlighted. The gross margin of zipper/button in '23 was 41.01%/42.21%, respectively, +2.95/+1.02pct, respectively, mainly due to overall product structure optimization (zipper/button sales volume +5.7%/+4.6% YoY, ASP +1.1%/+3.9% YoY) and contribution to capacity utilization improvement (capacity utilization rate of 66.81% in '23, increase of 3.51 pct year over year).
2) By market, domestic/overseas market revenue was +7.23%/+8.67%, respectively, and revenue accounted for 69%/31%, respectively.
24Q1 All categories and domestic and overseas markets achieved more than double digit revenue growth. We estimate that 24Q1 achieved more than double digit growth in revenue for all categories, driven by the end of the downstream customer inventory cycle. Among them, the ribbon base was small, the growth rate was the fastest, and the year-on-year growth rate was more than 20%. The rich button category achieved faster growth than zipper growth. By market division, we estimate that both domestic/overseas markets achieved double-digit growth in 24Q1. Among them, the overseas market is in the process of gradual restoration, and the domestic market is growing faster than the overseas market.
24Q1 gross margin increased, expense ratio decreased, and net profit margin to mother increased significantly. 1) Gross profit margin:
24Q1 +0.23pct to 37.93%, 2) Expense rate for the period: 24Q1 -2.3 pct to 26.53% year over year, with sales/management/R&D/finance expenses rates of -0.37/+0.49/+0.42/-2.84pct to 9.46%/12.95%/4.53%/-0.41% year over year, respectively. The large decline in financial expenses was mainly due to increased contributions from exchange earnings and interest income. 3) Net profit margin to mother: +2.04pct to 9.73% year-on-year in 24Q1.
Profit forecast and investment rating: The company is a leader in domestic apparel accessories. In 23 years, it took the lead in recovering positive growth in performance under the downstream customer removal cycle and upstream order pressure environment, reflecting the continuous increase in market share as the company continues to advance its internationalization+intelligent strategy. 24Q1 revenue continued to grow well, and profit levels rose further. The company's target revenue for 24 years reached 4.5 billion yuan (corresponding to a year-on-year growth rate of 15.2%), which is a positive guideline. Considering the good trend of the company taking orders, we raised the 24-25 net profit forecast from 6.39/7.19 to 656/751 million yuan, increasing the 26-year forecast value of 833 million yuan, corresponding to the 24-26 PE 21/19/17X, respectively. The company's dividend ratio in 2023 reached 94.3%, a further increase from the 74.3% level in 22. The high dividend characteristics are outstanding, and the “buy” rating is maintained.
Risk warning: weak consumption, exchange rate fluctuations, geopolitical risks, etc.