Incidents:

2024H1 revenue increased 25.57% year on year to 2.296 billion yuan, net profit to mother increased 37.79% year on year to 0.416 billion yuan, net profit after deducting non-return to mother increased 33.65% year on year to 0.401 billion yuan; single Q2 revenue increased 32.2% year on year to 1.496 billion yuan, net profit to mother increased 36.17% year on year to 0.338 billion yuan, net profit after deducting non-return net profit increased 31.06% year on year to 0.325 billion yuan billion yuan.

Comment:

Q2 Revenue growth increased further from month to month. The company's Q2 revenue increased 32.2% year-on-year to 1.5 billion yuan. In the context of overall order recovery in the industry, the company achieved a growth rate exceeding the industry average.

By product, revenue from button products increased 27.1% year on year to 0.93 billion yuan in the first half of the year, revenue from zipper products increased 24% year on year to 1.26 billion yuan, and revenue from other clothing accessories products increased 23.2% year on year to 0.08 billion yuan. By channel, domestic revenue increased 24.8% year on year to 1.54 billion yuan, and international revenue increased 27.2% year on year to 0.76 billion yuan.

Production capacity in Vietnam was officially put into operation, and the Bangladesh plant continued to climb. During the reporting period, the company opened an industrial park in Vietnam and put into operation. During the reporting period, the company had a total production capacity of 5.9 billion buttons and 0.44 billion meters of zippers. Also, along with order restoration and a rise in overseas factory capacity, the company's capacity utilization rate increased from 57.1% to 70.7%. Its capacity utilization rate in China was 75.5%, and the overseas capacity utilization rate was 49.6%.

Profitability restoration is excellent. 2024Q2's gross margin increased 0.5pct year over year to 43.9%. On the expense side, sales/management expenses rates were +0.5pct/-1pct to 7.2%/7% year-on-year, respectively. The financial expense ratio was -0.7%, and the overall cost side remained stable. As a result, the Q2 net margin increased by 0.8 pct year on year to 22.8%, and the profitability recovery trend is good.

Maintain healthy operating conditions. As of the 2024 interim report, the company's inventory increased 29% year on year to 0.78 billion yuan, and the number of inventory turnover days fell 5 to 93 days year on year. The number of turnaround days for accounts receivable/payable increased by 1/5 days year over year to 93/73 days. The company's net cash flow from operating activities increased 59.9% year-on-year to 0.39 billion yuan in the first half of the year. At the end of the period, it had monetary capital of 1.6 billion yuan, and the cash flow remained healthy. In addition, the company decided to pay an interim dividend of 0.2 yuan/share, totaling 0.23 billion yuan, corresponding to a dividend rate of 56%, and attaches great importance to shareholder returns.

Investment advice: As a leading company in the accessories industry, Weixing Co., Ltd. recovered well in 2024 orders and profitability, and Vietnam's production capacity was successfully put into operation to meet the increase in overseas orders. Continue to expand overseas markets and compete with YKK for market share in the medium to long term. The company is expected to achieve a year-on-year increase of 24.4%/15.2%/12.2% to 0.69/0.8/0.9 billion yuan in 2024-2026, corresponding to the current share price PE 21/18/16 times, maintaining its “buy” rating.

Risk warning: international macroeconomic fluctuations; fluctuations in raw material prices; customer inventory removal results fall short of expectations; capacity construction falls short of expectations; profit forecasts and valuations fall short of expectations, etc.