Description of the event

The company announced a preliminary increase in 2024 semi-annual results. It is expected that 2024H1 will achieve net profit of 380 million yuan to 433 million yuan, an increase of 40.43% to 60.02% over the previous year; net profit without deduction of 345 million yuan to 398 million yuan, an increase of 40.95% to 62.60% year on year.

Incident reviews

Benefiting from the industry's recovery & explosion strategy, performance continues to increase. On a quarterly basis, the company expects to achieve net profit of 0.192-0.245 billion yuan in 2024Q2, with a year-on-year growth range of 21.2% to 54.7%.

2024H1, the global economy is slowly recovering. Under the management guidelines of focusing on core categories, creating explosive products, and achieving value marketing, the company is driving product structure upgrades through explosive product launches and challenges such as Quick Anti-King, driving the growth of various product categories and achieving growth in the company's performance.

The industry is recovering and is expected to continue to improve in 24/25. In 2023, the total output of industrial sewing machines in the industry was about 5.6 million units, down about 11% year on year, falling back to close to the industry's sluggish level in 2016. 2024Q1, industrial sewing machine production also increased by more than 20%, and the industry is recovering. In terms of inventory, the inventory reduction effect in the first quarter was remarkable. At the end of March, the total inventory of 100 machine manufacturers in the industry was about 0.68 million units, down 25.14% year on year. Among them, industrial sewing machine inventory fell to the low value of 0.46 million units in the industry, down 29.48% year on year.

The explosion strategy continues to advance, and there are plenty of orders for the new product “Guojiao Wang” in 2024. In 2023616, Jack Co., Ltd. launched the new “Quick Reverse King” lockstitch sewing machine. It sold more than 500,000 units in a year, covering more than 170 countries around the world, and accounting for 45% of the single product market share. In 2024 616, Jack Co., Ltd. launched the new “Guojiao Wang” smart overlock sewing machine. On the day of launch, the 5-hour order amount exceeded 0.48 billion yuan, and the 24-hour order amount exceeded 0.51 billion yuan, and orders were full. Continued advancement of the company's explosive strategy and reduction of SKU and SPU can, on the one hand, increase market share and brand influence, and on the other hand, reduce manufacturing and after-sales maintenance costs and overall inventory levels, which is of great significance in improving the company's profitability.

Continue to improve a complete set of intelligent connectivity solutions to bring room for medium- to long-term growth. The company has achieved remarkable results in projects such as Tingyuxuan and Feiliwende through continuous optimization and improvement of complete solutions through efforts to create a benchmark model for Shantou customers and in-depth cooperation in joint innovation, meeting the customer's production needs for small batches and quick response.

Profit forecasting and valuation

The company's revenue for 2024-2026 is expected to be 6.678, 7.985, and 9.25 billion yuan, respectively, with year-on-year growth rates of 26.15%, 19.56%, and 15.84% respectively; the estimated net profit to mother is 0.786, 0.993, and 1.216 billion yuan, with year-on-year growth rates of 45.97%, 26.33%, and 22.44%, respectively.

The company's 2024-2026 performance corresponding PE was 17.76, 14.06, and 11.48 times, respectively, maintaining a “buy” rating.

Risk warning:

The recovery of the industry falls short of expectations; the risk of explosions and sales of complete products falling short of expectations; competition intensifies risks.