Core views:
The company announced the 2024 semi-annual performance advance announcement. 2024H1 expects the company to achieve net profit attributable to mother of 0.076-0.091 billion yuan, +76.16%-110.93% year-on-year, net profit of 0.057-0.068 billion yuan after deduction of non-return to mother, and +66.03%-98.07% YoY. Among them, in 2024Q2, the company is expected to achieve net profit attributable to mother of 0.046-0.061 billion yuan, +127.32%-200.67% year over year, net profit not attributable to mother 0.034-0.045 billion yuan, and +122.45%-194.54% year-on-year. The high increase in performance is mainly due to the fact that the company's Jingzhou project was put into operation, production capacity was greatly increased, factor resource costs were effectively reduced, and the scale effect was evident. Second, the company calculated Xinye Textile's advance payment impairment preparation of 19.502 million yuan in the same period last year.
The company's new production capacity will be released centrally in 2024. The Jingzhou project has significant cost advantages and the color spinning project has been successfully put into operation, and the annual performance is expected to grow rapidly. First, according to SSE Interaction, the first and second workshops of the 0.06 million ton tube yarn project in Jingzhou, Hubei were put into operation in August/October 2023, respectively. The third workshop has already been commissioned, and the company's production capacity will be greatly increased in 2024. According to the company's official WeChat account, the company lowered processing fees twice on April 22 and May 13, 2024. In the context of the reduction in processing fees, the Jingzhou project had a large-scale effect and significant cost advantages, leading to a continuous increase in 24Q2's performance. It is expected that after the entire Jingzhou project in Hubei is fully completed, the company's production costs are expected to be further reduced. Second, according to the company's official WeChat account, on July 16, 2024, the first cylinder of fiber dyeing of the “0.03 million ton annual fiber dyeing project” was successfully released. The color spinning project further extended the company's industrial chain and enhanced the company's product development capabilities. Third, the company implements a hedging policy for raw cotton futures, which can effectively reduce the impact of fluctuations in raw material prices on the company's performance.
Profit forecasting and investment advice. EPS is expected to be 1.33 yuan/share, 1.59 yuan/share, and 1.79 yuan/share in 2024-2026, respectively. Taking into account factors such as the company's position in the industry, competitive advantage, profitability, and performance growth, the company was given a 2024 12XPE valuation, corresponding to a reasonable value of 15.99 yuan/share, maintaining a “buy” rating with reference to comparable companies.
Risk warning. Risk of fluctuations in raw material prices, risk of macroeconomic fluctuations, risk of insufficient demand.