Key points of investment

The company released the 24H1 interim report. The revenue/net profit for the first half of '24 was +25.6%/+37.8% to 2.3 billion/0.42 billion, single Q2 revenue/net profit to mother +32.2%/+36.2% to 1.5 billion/0.34 billion, the mid-term dividend was 0.23 billion, and the dividend rate was 56.2%.

Button/zipper production and sales are booming, and profitability continues to increase.

The company's revenue for the first half of '24 was +25.6% to 2.3 billion. When split, the button business revenue was +27.1% to 0.93 billion, achieving a gross profit margin of 42.1%, an increase of 0.27pp over the previous year; zipper business revenue +24.0% to 1.26 billion, a gross profit margin of 42.9%, an increase of 0.34pp over the previous year.

The production capacity of buttons during the reporting period was 5.9 billion, up 0.1 billion from the same period last year; zipper production capacity was 0.44 billion meters, up 0.015 billion meters from the same period last year. The overall capacity utilization rate increased from 57.1% to 70.7%. As downstream clothing companies continued to remove inventory, and the company's Vietnam Industrial Park was built and put into operation, brand awareness and customer satisfaction in overseas markets continued to increase. Order production and sales were strong in the first half of 2024.

Overseas growth is better than domestic growth, and alternative logic is continuously verified

In the first half of 2024, the company's domestic revenue was +24.8% to 1.54 billion, and international revenue was +27.2% to 0.76 billion. The international business growth rate was faster than the domestic business growth rate.

In the future, the company will use the commissioning of the Vietnam Industrial Park as an opportunity to accelerate the layout of the international marketing network and international brand development. The Vietnam Industrial Park opened on March 20, 2024, and is currently receiving orders, producing, and delivering normally. Considering the first year of operation, the capacity utilization rate of Vietnam's industrial park will not be high; in addition to depreciation of fixed assets, although facing some loss pressure in 2024, the internationalization strategy is an important driver for the company's future growth.

The mid-term dividend was in line with expectations, and the high-dividend steady growth logic continued to be implemented in mid-2024. The company's dividend cash was 0.234 billion yuan, and the dividend rate was 56.2%. It was in line with the announcement guidelines for the 2024 mid-term cash dividend plan issued by the company at the beginning of the year, that is, the upper limit of the mid-term cash dividend for 2024 did not exceed 60% of the net profit attributable to shareholders of listed companies during the corresponding period. Since the company went public in 2004, the company has accumulated dividends 21 times. The dividend payment rates for 2021/2022/2023 are 88.9%/74.3%/94.3%, respectively, and the company's growth dividends have continued to be shared with shareholders.

Profit Forecast and Valuation:

As one of the largest and most comprehensive apparel accessories companies in the world, the company has been in the field of accessories production for more than 30 years and has actively sought change over the past ten years. The results have entered a period of releasing volume dividends, and it already has the ability to challenge YKK upward.

We raised our profit forecast. We expect revenue to increase 17%/14%/13% to 4.59/5.21/5.9 billion yuan in 24/25/26, respectively, and net profit to mother of 0.7/0.8/0.91 billion yuan, up 25%/14% year on year. The current market value corresponds to PE of 21X/18X/16X. The company has a clear competitive advantage in the field of accessories production, and continues to recommend and maintain the “buy” rating.

Risk warning: risk of raw material price fluctuations; production safety risk;