A number of **** companies performed brilliantly in May, creating an upward trend
Recently, a number of **** shoe companies disclosed May data, and revenue continued to accelerate month-on-month:
Fengtai's revenue in May increased 17% year over year, with a cumulative decrease of 11% in April (same below), +4% in March, -8% in February, and +16% in January; 23
Yuyuan's manufacturing business revenue increased 8% year-on-year in May, +3% year-on-year in April, +0.2% in March, -12% in February, +13% in January, and a cumulative decrease of 18% throughout the year;
Zhiqiang's revenue increased by 41% in May, +10% in April, +25% in March, +26% in February, +6% in January, and a cumulative decrease of 23% for the whole year.
In 24Q1, many weaving companies, including Huali, experienced significant order recovery, and increased profits. Judging from the data of various shoe companies above, we believe that the Q2 weaving industry boom may continue to improve. On the one hand, after experiencing the epidemic disrupting the production rhythm and storage cycle, the relatively reasonable inventory level of downstream brands is conducive to the normalization of order placement, or there is demand for inventory replenishment to promote order recovery; on the other hand, in this cycle, each supply chain or performance in terms of production capacity stability, geographical distribution, delivery capacity, service, etc. is divided along with the intention of brands to place orders Concentration on high-quality suppliers, changes in the pattern may bring more order increases to leading factories such as Huali.
Strong customer structure stability and excellent profitability
The company has a high-quality industry reputation and attracts active cooperation from customers. When accepting orders, the company comprehensively considers various factors such as order size, future continuous growth, and compatibility of ideas between the two parties. On the basis of the steady growth of major customers such as Nike and Deckers, the company continues to explore potential customers to develop and grow. Under the advantage of such a customer structure, it has continued to lead the industry for 23 years.
At the same time, thanks to adjustments in customer structure and product structure, as well as detailed cost control, strong execution, and improved factory operation efficiency, the company maintained a high level of gross margin and net profit margin.
Actively recruit workers in line with orders to maintain production capacity expansion
Since 23Q4, according to the new plant's commissioning schedule and order resumption, the company has begun recruiting new employees. With the gradual commissioning of the new plant in 24 years, the recruitment of group employees has been strengthened or strengthened to ensure delivery of subsequent orders. In the medium to long term, the company plans to continue to actively expand production capacity, continue to build multiple factories in Indonesia and Vietnam over the next 3-5 years, while maintaining production capacity flexibility through adjustments in the number of employees and overtime hours. Labor costs in Indonesia are more advantageous than Vietnam, but in the early stages of the Indonesian factory, there is still a gap in per capita efficiency compared to mature Vietnamese factories. After Indonesia's production capacity has been in operation for a period of time, the company will comparatively adjust production in the two places to balance cost and production efficiency.
Maintain profit forecasts and maintain “buy” ratings
The company has achieved remarkable results in strengthening cooperation with high-quality customers, and the gradual expansion of new customers has led to an increase in the company's orders; new plants in Indonesia and Vietnam have gradually been put into operation, and production capacity continues to expand. We estimate that the company's net profit for 24-26 will be 38.9/44.3/4.95 billion yuan, EPS will be 3.3/3.8/4.2 yuan/share, respectively, and the corresponding PE will be 20/18/16X, respectively.
Risk warning: Downstream demand falls short of expectations; fluctuations in raw material and labor costs; production capacity expansion falls short of expectations; risks such as exchange rate fluctuations, etc.