The forecast increase in the interim report exceeded expectations, and the median pre-profit increase of about 39% in 24Q2
The company announced a pre-increase in performance. It is estimated that 24H1 will achieve net profit of 3.8 to 0.43 billion yuan, +40 to 60% year on year, net profit of 3.45 to 0.398 billion yuan after deducting non-return net profit of 3.45 to 0.398 billion yuan, or +41 to 63% year on year. Corresponding to the 24Q2 single quarter, net profit attributable to mother was 1.92 to 0.245 billion, +22-55% year on year, after deducting non-return net profit of 1.81 to 0.234 billion, or +27 to 64% year on year. The overall performance exceeded the expectations of our previous report “Q2 Outlook: Shipbuilding, Offshore and Light Industry Equipment Upward” released on July 9, and slightly raised the 2024 profit forecast. The estimated net profit for 2024-26 is 7.6, 11.5, and 1.28 billion (previous values 7.2, 11.5, and 1.28 billion), respectively, corresponding to PE 16, 11, and 10 times PE. Comparatively, the company Wind unanimously expected an average PE value of 20 times. Considering the company's high profit flexibility, the company was given 24 times PE in 24 years, with a target price of 37.9 yuan (previous value of 35.8 yuan), maintaining a “buy” rating.
Global textile and garment manufacturing recovered moderately in 24Q2. The company's profitability improved and domestic garment exports continued to recover moderately since April. Exports of clothing and clothing accessories in March, April, and May were -23%, -9%, and -0% year-on-year, respectively. Marginal improvements continued to drive domestic demand for sewing machines. Overseas, Vietnam's 24Q2 textile exports were +3% year-on-year, further accelerating compared to the 24Q1 +2% year-on-year situation, boosting demand for sewing machine exports. Industrial sewing machine exports in April and May were -6%, +16%, +11% and +13%, respectively, and continued to improve. In the first half of the year, the company seized opportunities for industry recovery. Under the management guidelines of focusing on core categories, creating explosive products, and achieving value marketing, the company promoted product structure upgrades through explosive product launches and challenges such as Quick Fight, and achieved rapid growth in performance.
Continued optimism about product upgrades in the second half of the year led to an increase in the company's global market share in April, May, and June, Vietnam's textile exports grew by 6%, 4%, and 0% year-on-year, respectively, and marginally weakened. According to the report “Global PMI: The expansion of the manufacturing industry in developed countries decelerates marginally and momentum in the service sector falls” released by Huatai's macro team on July 9, the global manufacturing PMI fell 0.1 pp to 50.9 in June. The average of Europe, Britain and Japan declined marginally, and the new orders index, which is more related to exports, also declined. Although sewing machine exports continued to increase month-on-month in April and May, considering the uncertainty of geographical events such as global elections, we should not be overly optimistic about marginal changes in demand in the sewing machine industry in the second half of the year. However, for Jack, the logic of increasing market share and improving profitability due to product structure upgrades is expected to continue to be interpreted. According to the company's official account, Jack's Global New Product Launch Conference was held in Guangzhou on June 16. The new overlock sewing machine product “Guojiao Wang” exploded as soon as it came out, and received 0.48 billion orders on the same day. The “Guojiao Wang” smart sewing machine is compatible with four types of extreme fabrics: thick, thin, elastic, and hard, to achieve fast sewing while maintaining beautiful stitches, which is expected to further increase the company's market share.
Risk warning: 1) The recovery of global clothing consumption fell short of expectations; 2) shipping prices rose more than expected; 3) the risk of exchange rate fluctuations.