2024H1 Revenue +10% YoY /Net Profit to Mother +5% YoY. 1) 2024H1's revenue was 2.56 billion yuan, +10% YoY; net profit attributable to mother was 0.27 billion yuan, +5% YoY; net profit after deducting non-attributable net income was 0.26 billion yuan, +6% YoY. 2) In terms of profit quality: 2024H1 gross margin was +0.5pct to 20.8%; sales/management/finance expense ratios were -0.1 pct flat/+1.7 pct to 1.7%/2.7%/1.0% year over year, respectively. The increase in financial expense ratio was mainly due to increased interest on loans and increased exchange losses; overall, net margin was -0.7 pct to 10.9% year over year.
2024Q2 Revenue +8% YoY /Net Profit to Mother +3% YoY. 1) 2024Q2's revenue was 1.46 billion yuan, +8% YoY; net profit attributable to mother was 0.17 billion yuan, +3% YoY; net profit after deducting non-attributable net income was 0.17 billion yuan, +5% YoY. 2) In terms of profit quality: 2024Q2 gross margin +0.4 pct to 21.5% year on year; sales/management/finance expense ratio was -0.1/+0.1/+1.9 pct to 1.7%/2.4%/0.7% year on year, respectively; above comprehensive, net margin -0.7 pct to 12.2% year on year.
Order demand is healthy, 2024H1 worsted yarn business revenue is growing steadily, and cashmere business sales are growing rapidly. The results of the company's broadband development strategy are gradually showing, expanding categories, innovating usage scenarios, and launching product lines such as sports, home textiles, interior decoration, and industrial yarn. Considering industry trends and base changes, we judge that 2024H1's wool-worsted yarn business orders have been growing steadily year-on-year.
1) By region: 2024H1 domestic/export sales were 1.67/0.88 billion yuan respectively, +9%/+11% year-on-year, accounting for 65%/35% respectively; gross margin was 22.7%/17.4%, respectively, and +1.1/-0.5pct year-on-year respectively.
2) Business division: 2024H1 worsted yarn/cashmere yarn/wool strip/modified treatment, dyeing and finishing and cashmere processing business revenue was 14.8/0.68/0.36/0.02 billion yuan, respectively, +10%/+20%/-5%/+45% year over year; gross margins were 27.1%/14.2%/5.4%/30.8%, respectively, +1.4/-2.1/-0.3/+1.2pct, respectively. Looking at the volume-price breakdown: ① Wool-worsted yarn: 2024H1 sales volume was 9285 tons (+13% year over year) /sales unit price 0.159 million yuan per ton (-3% year over year). We judge that the trend of steady growth in sales volume is expected to continue throughout 2024. ② Cashmere yarn: 2024H1 sales volume is 1,029 tons (+39% year over year)/sales unit price 0.658 million yuan per ton (-14% year over year). Based on the company's business conditions, we judge that the current cashmere yarn orders and shipments have maintained steady year-on-year growth/unit price decline is mainly due to changes in product structure.
The medium- to long-term capacity expansion plan is progressing smoothly, and wool-worsted yarn production is expected to be released steadily in the future. 1) At the end of 2023, the company's wool-worsted yarn production capacity was about 0.13 million spindles. In order to match the increase in order demand from downstream customers, the company's production capacity expansion plan continued to advance since 2024 to accelerate the global production capacity layout: ① During the 2024H1 period, the 0.015 million spinning equipment involved in the second phase of the company's “0.06 million spindles high-grade worsted ecological yarn” was put into operation one after another. We estimate that 2024H2 and beyond is expected to contribute to the increase in output; ② Vietnam's “0.05 million spindles of high-grade worsted ecological yarn” The production capacity of 0.02 million ingots involved in the first phase of the “Textile Dyeing and Finishing Project” is estimated to be put into operation one after another from the end of 2024 to 2025. ③ Ningxia's “0.02 million spindles of high-quality worsted wool (velvet) yarn construction project” is scheduled to be put into operation one after another in 2025H2. 2) The company's vertically integrated production chain covers multiple upstream links, has complete supporting facilities, advanced equipment, high management efficiency, and has significant advantages in terms of cost, quick response, and meeting the differentiated needs of customers.
Inventory turnover improved, and cash flow performance was normal. 1) Inventory: At the end of 2024H1, the company's inventory was -3.3% YoY to 1.82 billion yuan, and the number of inventory turnover days was -13.1 to 163.7 days YoY. 2) Cash flow: 2024H1 accounts receivable turnover was +0.1 to 40.7 days year on year, and the net operating cash flow was 0.06 billion yuan (about 0.2 times the net profit returned to mother during the same period). We determine that it was mainly due to the preparation of goods in response to the peak shipping season, and the overall performance was normal.
The 2024 results are expected to be released steadily. Looking ahead to 2024H2, we estimate the overall situation of wool worsted yarn orders health/cashmere yarn orders are expected to continue to grow year over year. At the same time, considering that the unit price pressure on wool yarn is expected to decrease in the future (wool prices fluctuated from a high level in Q1 to Q4 in 2023), we estimate that the company's revenue and performance are expected to grow steadily in 2024.
Investment advice. The company is a leader in wool spinning yarn, and the growth curve is clear. We slightly adjusted our profit forecast and estimated net profit of 0.446/0.501/0.555 billion yuan respectively from 2024 to 2026, corresponding 10.5 times PE in 2024, maintaining a “buy” rating.
Risk warning: risk of capacity expansion; risk of weak orders; risk of fluctuations in raw material prices; risk of foreign exchange fluctuations.