Core views:
Question 1: How competitive is the company's worsted yarn business and cashmere business? Wool-worsted yarn:
(1) According to the official websites of various companies, New Australia's worsted yarn production capacity ranks second in the world and number one in China. (2) New Australian wool-worsted yarn has many advantages in product, cost, scale, etc., and actively seizes the market share of micro, small and medium-sized enterprises to increase market share; the development strategy of established European competitors is conservative. The company actively implements broadband strategies and production promotion, has advantages in terms of delivery, cost, service, etc., and is gradually expanding its international market share. Cashmere yarn: (1) According to the official websites of various companies, the production capacity of cashmere yarn in New Australia ranks second in the country. (2) The cashmere yarn business in New Australia undertook the assets of the Bank of China Cashmere Industry and acquired Duncan in the UK. It has many advantages in product development, cost, etc., and there is plenty of room for improvement in revenue/profitability.
Question 2: Is the company's performance greatly affected by fluctuations in wool prices? The gross margin of the worsted yarn and wool wool yarn business is positively correlated with wool prices. Since 2020, under the guidance of the broadband strategy, the company has actively expanded category/customers/products, and performance stability has improved dramatically in recent years.
Q3: Will the company be adversely affected by increased trade frictions? (1) According to the investor interactive platform, the company's direct exports to the US account for a relatively small share of revenue, and the impact on the company's overall operations is limited. (2) The company actively lays out production capacity in Vietnam, which will effectively avoid the risk of trade friction.
Question 4: Why is the company's 24Q1 performance slightly inferior to the industry? According to the company's financial report, the company's 24Q1 profit side performance was slightly lower than that of the textile manufacturing sector as a whole. It was mainly affected by falling wool prices and the acquisition of assets in the cashmere sector; I am optimistic that the company's 24-year performance will improve quarterly. On the one hand, the 23-year performance base was high and low. On the other hand, along with the release of new production capacity and optimization of the product structure, profitability is expected to increase.
Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 0.62 yuan/share, 0.70 yuan/share, and 0.80 yuan/share, respectively. Referring to the 2024 valuation of comparable companies, the company was given a price-earnings ratio of 14 times in 2024, with a reasonable value of 8.62 yuan/share, maintaining a “buy” rating.
Risk warning. Macroeconomic, industry and market fluctuation risk, raw material price fluctuation risk, exchange rate fluctuation risk.