Investment highlights: The company announced its 2024 quarterly report. The first quarter achieved operating income of 1,967 billion yuan, up 6.91% year on year, and realized net profit attributable to shareholders of listed companies of 62 million yuan, up 257% year on year, reversing losses sharply from month to month; net profit after deduction was 60 million yuan, up 365.61% year on year, with basic earnings per share of 0.04 yuan.
The main business boom improved, and the company's performance in the first quarter improved dramatically. The company's main business is biomass cellulose filament (viscose filament) and spandex. It is a leader in the domestic field of viscose filament and spandex, ranking first and third in the country in terms of production capacity, respectively. The company has 90,000 tons of viscose filament production capacity and 180,000 tons of spandex production capacity. Since the second half of 2023, with the rise of national clothing in China driving the rapid growth of domestic demand for viscose filament, the price of viscose filament has gradually risen, and the industry boom has continued to improve. Since this year, demand for viscose filament has maintained a good trend, and product prices have risen further. According to Zhuochuang News data, since 2024, the domestic price of 120D/30F viscose filament has risen from 43,000 yuan/ton to 44,750 yuan/ton, an increase of 4.07%. The average price in the first quarter was 43,000 yuan/ton, up 1.66% year on year and 1.49% month on month. Driven by the increase in the price and sales volume of viscose filament, the company achieved revenue of 1,976 billion yuan in the first quarter, an increase of 6.91% over the previous year.
In terms of profitability, driven by the rise in the viscose filament industry, the company's comprehensive gross profit margin in the first quarter was 10.74%, up 1.1 percentage points year on year and 2.24 percentage points month on month; net profit margin was 3.14%, up 2.19 percentage points year on year, reversing losses sharply from month to month. Driven by increased profitability, the company achieved net profit of 62 million yuan in the first quarter, an increase of 257% over the previous year, and a sharp reversal of losses from month to month.
Demand for Guofeng clothing is growing rapidly, and the viscose filament boom is expected to continue to rise. China's demand for viscose filaments is generally concentrated in overseas markets, and the domestic market accounts for a relatively small share. Since 2020, national costumes such as horse dress and Hanfu have gradually emerged in China, and the popularity has continued to increase. Since 2023, demand for Guofeng clothing has risen further, driven by increased domestic tourist traffic and traffic from platforms such as Douyin and Xiaohongshu. Viscose filament is an essential material for making jacquard fabrics in horse masks. With the rise of national style clothing, it is expected to drive rapid growth in domestic demand for viscose filament.
The total production capacity of viscose filament in China has remained at the scale of 21-220,000 tons in recent years. The viscose filament industry is highly concentrated. There are only three companies: Xinxiang Chemical Fiber, Jilin Chemical Fiber, and Silya. Xinxiang's chemical fiber production capacity accounts for about 40% of the country's total production capacity, ranking first in the world. Since industry regulations strictly limit new production capacity, the overall production capacity of viscose filament is expected to stabilize in the future. Driven by the rapid growth in domestic demand for viscose filaments, the supply and demand of the industry will continue to be tight in the future, driving the upward trend in the industry. As an industry leader, the company is expected to fully benefit from the upward trend in the industry in the future.
The spandex industry is booming and is expected to improve marginally this year. The price of spandex has been on a downward trend in recent years, and the industry boom continues to decline. The gross margin of the company's spandex business was -0.26% in 2023, and losses in the spandex business greatly dragged down the company's performance. According to Zhuochuang News data, the average price of spandex 40D in the first quarter was 29,700 yuan/ton, down 4.83% from the previous quarter. Benefiting from the drop in raw material prices, the spandex price difference in the first quarter was 12,965 yuan/ton, an increase of 1,242 yuan/ton over the previous quarter. Demand growth in the spandex industry has remained around 10% in recent years. On the supply side, there are currently few projects under construction in the industry. Due to the low industry climate, there is also great uncertainty about the progress of production expansion. Therefore, it is expected that there will be a marginal improvement in supply and demand in the industry in the future, driving the company's spandex business profit increase.
Profit forecast and investment rating: The company's 2024 and 2025 EPS is expected to be 0.29 yuan and 0.37 yuan. Based on the closing price of 4.73 yuan on May 7, PE is 16.56 times and 12.69 times, respectively. Considering the upward space for the viscose filament boom and the company's position in the industry, the company was given an investment rating of “increase in wealth”.
Risk warning: industry competition intensifies, product prices fall, demand falls short of expectations