Incidents:
The company released its 2024 mid-year report. 2024H1 achieved revenue of 2.67 billion yuan +2% year over year, net profit to mother of 0.22 billion yuan +75% year over year, net profit of 0.22 billion yuan after deducting net profit of 0.22 billion yuan +75% year over year, and net operating cash flow of 0.15 billion yuan.
Comment:
Increased profitability. In 2024Q2, the company achieved revenue of 1.35 billion yuan +5% year over year, and net profit to mother of 0.13 billion yuan +29% year over year. 2024H1 achieved an 18.20% year-on-year increase in gross profit margin of 3.09pct, and a 7.99% increase in net profit margin of 3.40pct year-on-year.
Cash dividends and repurchase amounts are higher. The company plans to pay an interim dividend, with a cash dividend of 1.5 yuan for every 10 shares, a dividend payment rate of 53%, and a total dividend of 0.12 billion yuan. The dividend rate is 3.2% based on the closing price on August 7. The company completed the cancellation of the previous repurchase of 41.57 million shares in June 2024, with a repurchase amount of 0.2 billion yuan.
Profits in the home textile industry increased. 2024 H1 is affected by the gradual weakening of demand in the global textile market, and foreign cotton prices continue to be under pressure; the domestic cotton market currently has strong supply and weak demand, and prices are expected to remain low and volatile. The company's 2024H1 home textile business achieved a basic year-on-year flat revenue of 1.91 billion yuan, a gross profit margin of 23.4%, and a year-on-year increase of 5.4 pct, achieving gross profit of 0.45 billion yuan +0.11 billion yuan year-on-year.
The paint business is growing rapidly, and production will begin in 2025 or all. 2024H1's paint business has sufficient on-hand orders, and the capacity utilization rate continues to rise, achieving revenue of 0.08 billion yuan +54% over the same period last year. In terms of capacity construction, the first phase of 0.05 million tons/year of functional coating materials has been successfully completed and put into operation. It is in the production capacity climbing period. Production will be fully put into operation in 2025 or all, and the qualification certification of key products is progressing smoothly.
The lithium battery electrolyte additive business is progressing smoothly in increasing production and reducing costs. The monthly output of 2024H1's VC products increased to 500 tons, while continuing to reduce costs and increase efficiency by relying on multiple recycling technology; in June, it successfully achieved balance of income and expenditure on key cost projects such as raw materials, hydropower, etc.
Maintain an “Overweight” rating. According to the company's interim performance increase profit forecast, operating income from 2024 to 2026 is expected to be 5.7/6.3/6.9 billion yuan, +7%/11%/8% year on year, and net profit to mother is 0.41/0.47/0.54 billion yuan (previous forecast value was 0.36/0.42/0.48 billion yuan), +44%/15%/14% year over year, corresponding PE is 9/8/7 times.
Risk warning: majority shareholders' equity is pending freeze, and new business production/sales/company performance falls short of expectations