The company released the 24H1 interim report, achieving operating income of 2.56 billion yuan, up 10.1% year on year, and achieving net profit of 0.27 billion yuan, up 4.5% year on year. Among them, 24Q2 revenue and net profit to mother increased by 8.4% and 3.4% year on year, respectively, in line with market expectations.
The worsted spinning business performed brilliantly. By product: 1) Wool-worsted yarn: 24H1 revenue grew 10% year on year, with sales volume of 9,285 tons, up 13.3% year over year, faster than revenue growth. We estimate that the company is taking orders well and has a full capacity utilization rate (24H1, the gross margin of this business also increased 1.4 pct year on year). 2) Cashmere yarn: 24H1 revenue grew 20% year on year, and production capacity utilization increased steadily in the first half of the year. Among them, the subsidiary Ningxia Xin'ao's revenue increased 25% year on year, self-operated sales increased 19.2% and 39% year on year, respectively, but gross margin decreased 2.1 pct year on year. We believe this was mainly due to rising raw material prices, increased depreciation after the acquisition of cashmere assets, and product structure. 3) Wool wool strip: 24H1 revenue growth rate is -5% year on year. We judge that it is mainly due to the decline in wool prices; 4) Modified treatment and dyeing and finishing processing: 24H1 revenue growth rate is 45% year over year.
Production capacity is expanding steadily. Specifically: 1) The 15,000 spindle equipment involved in the second phase of the company's “60,000 spindles high-grade worsted eco-yarn project” has been put into operation; 2) the subsidiary's “50,000 spindles high-grade worsted eco-yarn textile dyeing and finishing project” is progressing steadily according to the plan. The first phase of the 0.02 million spindles project is expected to be completed and put into operation one after another from the end of this year to 2025; 3) The subsidiary Xinao Yinchuan “20,000 spindles of high-quality worsted wool (wool) yarn construction project” is scheduled to be put into operation one after another in the second half of 2025.
As of 24H1, the company's inventory turnover days was 164 days, down 13 days from year on year. The number of accounts receivable turnover days was basically flat, and the cash flow from operating activities was 0.063 billion, which was positive year on year.
The company implements a sustainable broadband development strategy. With its leading position in the industry and product advantages, the company is expected to continue to increase its market share in the future. At the same time, medium- to long-term production expansion plans also guarantee the sustainability of growth. Wool price performance has remained relatively lackluster since this year. Waiting for prices to rise steadily in the future, we believe the company is expected to show good revenue and profit elasticity.
According to the semi-annual report, we adjusted the profit forecast. The company's earnings per share for 2024-2026 are 0.62, 0.72, and 0.81 yuan (previously 0.63, 0.74, and 0.86 yuan), respectively. Referring to comparable companies, a PE valuation is 14 times that of 2024, corresponding to a target price of 8.68 yuan, maintaining the “gain” rating.
Risk warning: raw material prices fluctuate, production capacity expansion falls short of expectations, market demand fluctuations, exchange rate changes