Jack Co., Ltd.: Global sewing equipment leader, business quality continues to improve. The company's main business is industrial sewing machinery. Its products benefit more than 170 countries and regions around the world. It insists on building explosives and streamlining SKUs, focusing on core categories, and successfully launching Quick Anti-Wang flagship explosives, which have won wide recognition in the market. The performance side is expected to accelerate its inflection point. 1) Revenue side: Benefiting from the accelerated recovery in demand in the sewing machinery industry after the pandemic in 2021, the company achieved revenue of 6.54 billion yuan, a year-on-year increase of 72%. Revenue was affected by the demand side in 2023-2023. Revenue from 2023Q3, 2023Q4, and 2024Q1 was +10%, +8%, and +13%, respectively, with a clear upward trend. 2) Profit side: In 2023, the company achieved net profit of 538 million yuan to mother, and CAGR reached 16% in 2020-2023. Against the backdrop of pressure on the revenue side from 2022 to 2023, the company still achieved slight growth on the profit side and performed well. Against the backdrop of relatively stable expense ratios and positive gross margins, the company's net sales margin increased rapidly in 2021-2024Q1, reaching 11.86% in 2024Q1.

Industrial sewing machines: The downstream boom is marginally improving, and I am optimistic that the company's market share will increase rapidly. 1) Demand side: Industrial sewing machines are a typical cyclical circuit. Currently, they are at the bottom of the industry cycle where domestic and export sales resonate. In the short term, many macroscopic and mesoscopic data for the domestic textile and garment market are positive. Overall, the first half of the year showed signs of weak recovery. We judge that demand for sewing machinery is expected to increase significantly in the second half of the year. In terms of overseas markets, China exported 1.01 million industrial sewing machines in 2024Q1, or -5%. The decline narrowed markedly. Among them, demand in the external demand market, mainly from India, Vietnam and other countries, began to recover markedly, and I am optimistic that the boom will pick up at an accelerated pace in the second half of the year. In addition, the industrial sewing machine market inventory was rapidly digested. The 2024Q1 industrial sewing machine industry inventory was 460,000 units, -29% over the same period. The industry inventory structure was actively optimized, and the inventory reduction effect is obvious. Demand for stock replenishment is expected to be gradually released, which will further drive demand for industrial sewing machines. 2) Supply side: The company's industrial sewing machines have global competitiveness, and the overall market share is showing an upward trend. Using production as a statistical measure, we estimate that the company's share of the domestic industrial sewing machine market will be about 32% in 2023, which is a significant increase compared to 2018 (16%). Under the “small order fast reverse” industry trend, the requirements for garment companies' “small batch order+rapid production” capacity are rapidly increasing. The company has a history of 5 years of research and development, and successfully launched explosive products such as “Fast Reverse” to solve the problem of “small single quick reverse” from the root, and sew 100 models every day without stopping to cope with new changes in small batches, multiple batches, and multiple styles of clothing production. Looking forward to the future, I am optimistic that under the “small single fast reverse” trend, the company will lead the transformation of the industrial sewing machine market, and the market share is expected to increase rapidly.

Complete intelligent connection system: To solve the pain points of industry development, the company has obvious first-mover advantages. The textile industry is a typical labor-intensive circuit. In the context of an industry where employment is difficult and labor is expensive, the textile industry is undergoing a general trend of intelligent transformation. As far as the company is concerned, the development of a complete intelligent connection system business can not only open up the ceiling of the main industrial sewing machine business, but more importantly, expand the medium and large customer base through the complete intelligent connection market and increase the company's market share among CUHK customers. Looking at specific products: 1) Intelligent tailoring: In 2021, China's imports and exports of equipment before and after sewing were US$738 million and 426 million US dollars respectively. There is a large trade deficit, and at the same time, there is still a lot of room for improvement in penetration rate. The company's merger and acquisition of German Benma strengthens the competitiveness of pre-sewing equipment. On the basis of stabilizing high-end customers, small and medium-sized customers are expected to become an important growth point. 2) Intelligent hanging system: Solves traditional post-workshop production pain points, production efficiency is greatly improved, and the penetration rate is still low. The company's hanging system can help customers increase production efficiency by 30%. The cost performance advantage is obvious, and the client is optimistic about speeding up the introduction.

3) Intelligent warehousing logistics: The company provides intelligent warehousing solutions based on fabrics, accessories, finished products, and tailoring to further build a closed-loop smart factory network, which is expected to become a new growth point in the future.

Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 65.91, 88.15, and 10.086 billion yuan, respectively, +25%, +34%, and +14%; net profit to mother will be 6.89, 10.19, and 1,238 billion yuan, respectively, +28%, +48%, and +22%, respectively; EPS will be 1.42, 2.10, and 2.56 yuan, respectively. The 2024/6/7 stock price will be 19.13, and 11 times, respectively, giving PE an “increase” rating.

Risk warning: Industry sentiment is declining, industry competition is intensifying, and new product development falls short of expectations.