Core views

In the first half of 2024, the company's performance was outstanding, mainly due to the remarkable results of the explosives strategy, which promoted rapid revenue growth and increased profitability in the industrial sewing machine business. In addition, the company continues to increase research and investment in cutting-edge technology and emerging fields to optimize the cost of various products and further enhance profitability.

Looking forward to the future, on the one hand, the company will continue to strengthen its explosive product strategy and use this opportunity to build an all-round advantage in terms of marketing networks, quality control, and fast service; on the other hand, domestic textile industry investment picked up in the first half of the year, the stock replenishment cycle began, and foreign demand gradually stabilized and continued to improve, and the company's performance is expected to continue to increase rapidly.

occurrences

In the first half of 2024, the company achieved revenue of 3.235 billion yuan, a year-on-year increase of 20.23%; net profit to mother was 0.417 billion yuan, an increase of 53.99%; net profit after deduction was 0.382 billion yuan, an increase of 56.14% over the previous year. Among them, Q2 achieved revenue of 1.606 billion yuan in a single quarter, up 29.15% year on year, net profit to mother 0.229 billion yuan, up 44.38% year on year; net profit without deduction of 0.218 billion yuan, up 52.23% year on year.

Brief review

The explosives strategy has had remarkable results, driving industrial sewing machine revenue to achieve a relatively rapid growth in 2024H1, mainly due to the rapid growth in explosives sales in the industrial sewing machine business. Specifically: ① The industrial sewing machine business achieved revenue of 2.802 billion yuan, an increase of 19.11% over the previous year. It mainly benefited from the company's deepening SKU streamlining strategy, grasping the core needs of customers, and creating two popular products, Kuaihan Wang and Guo Jiao Wang. Sales increased rapidly in the first half of the year. ② The cutting and paving machine business achieved revenue of 0.324 billion yuan, an increase of 25.32% over the previous year, mainly due to cost reduction and customer resource sharing due to the synergy between sewing machines and pre-sewing equipment. ③ The automatic shirt and denim sewing equipment business achieved revenue of 0.1 billion yuan, an increase of 32.78% over the previous year. It mainly benefited from the improved competitiveness of the company's core products, further optimization of supporting solutions, and achieved a two-way increase in the market share of small, medium and large customers.

The increase in 2024H1's profitability mainly benefited from product restructuring and cost optimization 2024H1. The gross profit margin and net profit margin were 31.81% and 12.88% respectively, up 3.40 and 2.82 pcts from the previous year, respectively.

The increase in profitability mainly benefited from product restructuring and cost optimization: ① In the first half of the year, sales of explosives such as Kuibanwang had high gross margins, which boosted the gross margin of the industrial sewing machine business by 3.35 pcts. ② The company continues to increase research and investment in cutting-edge technology and emerging fields to optimize the cost of various products.

The company uses the explosives strategy to strengthen its dominant position in various areas. Revenue is expected to continue to increase in the context of domestic and foreign demand resonance, and the company's explosives strategy has achieved remarkable results, and has taken this opportunity to continuously strengthen its dominant position in all areas. ① The company strategically focuses on explosives, and uses explosives promotion to achieve all-round capability improvement: on the one hand, the company increases R&D investment, deepens SKU streamlining strategies, pays great attention to users' unmet needs and pain points, and focuses on creating differentiated explosives and solutions to enhance customer competitiveness; on the other hand, the company comprehensively reviews and optimizes explosive-related IPD processes to form explosive-related IPD processes, improve explosives development efficiency, and use explosives sales to create all-round advantages such as marketing networks, quality control, and fast service. ② Explosive products such as Kuibanwang and Guo Jiao Wang performed brilliantly: From June 16, 2023 to June 16, 2024, the company sold more than 0.5 million units, covering more than 170 countries around the world, and the single product market share reached 45%. On June 16, 2024, the company launched the Jiao Wang smart overlock sewing machine. The order amount exceeded 0.48 billion yuan in 5 hours and 0.51 billion yuan in 24 hours.

Domestic and international demand is expected to resonate, driving continued rapid revenue growth. ① Investment in the domestic textile industry picked up, and the inventory replenishment cycle began: 2024H1's domestic revenue was 1.773 billion yuan, an increase of 42.28% over the previous year. From January to June 2024, the total amount of fixed asset investment completed in the domestic textile industry increased by 14.3% year on year, up 16.3 pcts from the same period last year; inventory of finished products produced in the domestic textile industry increased 7.8% year on year, up 6.1 pcts from the same period last year. ② Foreign demand gradually stabilized and continued to consolidate its positive trend: in the first half of 2024, according to data from the General Administration of Customs, China's cumulative export value of sewing machinery products was 1.608 billion US dollars, an increase of 10.15% over the previous year. Among them, the export volume of industrial sewing machines was 2.28 million units, with an export value of 0.73 billion US dollars, up 1.49% and 5.28%, respectively; the export volume of equipment before and after sewing was 0.87 million units, with an export value of 0.235 billion US dollars, up 32.31% and 13.69%, respectively. Looking forward to the future, as the level of global inflation and the textile industry's business conditions continue to improve, the momentum to replenish textile and garment stocks in major overseas markets such as the US is being actively released, and the phased stabilization and positive trend of industry exports continues to consolidate.

Profit forecasting and investment advice

The company's net profit for 2024-2026 is expected to be 0.773, 0.969, and 1.141 billion yuan, respectively, up 43.49%, 25.46%, and 17.67% year-on-year, respectively. The corresponding PE is 15.58, 12.42, and 10.55 times, respectively, maintaining the “buy” rating.