Key points of investment:
The company released its 2024 mid-year report, and both revenue and profit sides were in line with expectations. 24H1's revenue was 2.56 billion yuan (YoY +10.1%), net profit attributable to mother was 0.266 billion yuan (YoY +4.5%), net profit not attributable to mother was 0.26 billion yuan (YoY +5.8%). Among them, 24Q2's quarterly revenue of 1.46 billion yuan (YoY +8.4%), net profit to mother was 0.17 billion yuan (YoY +3.4%), and net profit not attributable to mother was 0.166 billion yuan (YoY +5.4%), all of which reached record single-quarter highs. Due to net exchange earnings contributing more than 20 million yuan in the same period last year and additional equity incentive fees in the current period, the profit growth rate in the 24Q2 single quarter was low. We estimate that if exchange gains and losses (dragging down profit growth by about 11 pcts) and equity incentive cost factors (dragging down profit growth by about 2 pcts) are excluded, the 24Q2 net profit growth rate for 24Q2 was above 16% year-on-year under a comparable scale, reflecting the real growth of the company.
Net interest rate temporarily declined, but when broken down, gross margin bucked the trend. Fee control other than financial expenses was quite excellent. According to the interim report, 24H1 gross profit margin was 20.8% (+0.5pct year over year), of which 24Q1/Q2 was +0.6pct/+0.4pct, respectively. The expense ratio for the 24H1 period was 7.7% (+1.6 pct year over year), mainly due to exchange profit and loss differences, etc., and the financial expense ratio was +1.7 pct year over year. Other expenses were basically flat or even improved. In the end, 24H1 net profit margin was 10.4% (-0.6pct year over year).
According to the interim report, the main business situation: 1) Wool spinning: 24H1 revenue of 1.48 billion yuan (+10%), split sales volume of 9285 tons (+13.3% year over year), average price 0.159 million/ton (-2.9% year over year), far better than the decline in Australian wool raw material prices in the first half of the year, reflecting the company's micro supply and demand superior to the industry as a whole, which is ultimately reflected in the gross profit margin of 27.1% (+1.4pct year on year), and the order delivery schedule exceeded the same period in history. 2) Cashmere: 24H1 revenue 0.68 billion yuan (YoY +19.6%), gross profit margin 14.2% (-2.1pct). Among them, Ningxia Xinao 24H1 had revenue of 0.53 billion yuan (+25.2% YoY), split sales volume of 1,029 tons (YoY +39.1%), average price 0.518 million/ton (-10% YoY). The blended product strategy promoted cashmere products to be more cost-effective and functional, and also successfully led to rapid sales growth. At that time, Ningxia's capacity utilization rate was close to full production. It is worth looking forward to. 3) Wool wool strip: 24H1 revenue 0.36 billion yuan (YoY -5.3%), gross profit margin 5.4% (YoY -0.3pct). Wool wool is an intermediate product after initial processing, which is greatly affected by downstream demand.
The global high-quality supplier of wool spinning yarn is currently at the starting point of expanding wool yarn production and full production of cashmere yarn. Dual wheel resonance drives continuous growth and maintains a “buy” rating. Against the backdrop of overall weak demand for global apparel and low raw material prices in Australian wool, the company has bucked the trend for many consecutive seasons, showing an independent alpha that crosses the cycle. Once the subsequent industry environment is supported, the company's growth will be even more remarkable. At the present time, we will comprehensively consider the current state of downstream demand, the pace of new production capacity climbing, product structure upgrades, etc., mainly reducing 24-26 sales volume and increasing gross profit margin for the cashmere business, and ultimately maintaining the 24-25 year gross profit margin for the cashmere business, but slightly lowering the 25-26 profit forecast. The net profit for 24-26 is expected to be 0.45/0.51/0.59 billion yuan (the original 25-26 year was 0.54/0.64 billion yuan), corresponding PE is 10/9/8 times. Typical undervalued, steady growth, and high dividend labels maintain a “buy” rating.
Risk warning: downstream demand and orders are weakening; cashmere yarn sales promotion falls short of expectations; raw material prices fluctuate sharply.