经营质量好转趋势，存货周转加速，现金流大幅增长。根据三季报，24Q3 期末存货同比减少8.2 亿元至41.4 亿元（同比-16.5%），存货周转天数222 天（同比-84 天），订单回暖之后的周转加速。24Q1-3 经营现金流净额12.4 亿元，较23 年同期的6.3 亿元大幅增加，现金流改善强度大于利润端。得益于充裕的现金流，公司年内已偿还部分银行借款，截至24Q3 末资产负债率34.4%，较23 年末大幅改善4.7pct。考虑到公司24Q3 末的未分配利润已累计高达52.3 亿元，我们认为只需配合当期现金流改善，其稳定的高分红就能够得以保障，看好公司是潜在的优质高分红投资标的。Key points of investment:
The company released its 2024 three-quarter report, and deducted non-net profit for a single quarter continued to expand month-on-month compared to the previous quarter, in line with expectations. 24Q1-3 revenue was 6.07 billion yuan (YoY +19.3%), net profit attributable to mother 0.413 billion yuan (YoY -25.4%), net profit not attributable to mother 0.255 billion yuan (YoY +138.6%). Among them, 24Q3 revenue was 2.09 billion yuan (YoY +11.4%), net profit due to mother was 0.18 billion yuan (YoY +5.7%), net profit after deducting non-return to mother was 0.148 billion yuan (YoY +256.9%), and net profit of 0.115 billion month-on-month compared to 24Q2. We expect 24Q4 to continue to expand and continue to improve.
Production capacity recovery was used to narrow down price discounts, driving marginal gross margin restoration. According to the three-quarter report, 24Q3 revenue was +11.4% YoY. We expect spin-off sales volume YoY + high order, average price YoY + low order. After the price discount narrows, the company's yarn price will remain strong even against the backdrop of continuous pressure on raw cotton prices, and reflect a gross profit margin of 14.0% for 24Q3, a further increase from the 24Q1/Q2 gross profit margin of 5.9%/13.5%. Due to the rapid depreciation of the US dollar against the Vietnamese dong and RMB in September, it had a negative impact on the company's gross margin. If the exchange rate factor is excluded, we expect the company's 24Q3 gross margin increase to be even greater. Considering that the US dollar exchange rate has recently rebounded to a certain extent, the company's 24Q4 gross margin increase is expected to be even more significant.
Operating quality is improving, inventory turnover is accelerating, and cash flow has increased dramatically. According to the three-quarter report, inventory at the end of the 24Q3 period decreased by 0.82 billion yuan year on year to 4.14 billion yuan (-16.5% year over year), the number of inventory turnover days was 222 days (-84 days year on year), and turnover accelerated after order recovery. The net operating cash flow of 24Q1-3 was 1.24 billion yuan, a significant increase from 0.63 billion yuan in the same period in '23. The improvement in cash flow was stronger than on the profit side. Thanks to abundant cash flow, the company has repaid some of its bank loans during the year. As of the end of 24Q3, the balance ratio was 34.4%, a significant improvement of 4.7 pct from the end of 23. Considering that the company's accumulated undistributed profit at the end of 24Q3 reached 5.23 billion yuan, we believe that only by cooperating with current cash flow improvements, its stable high dividend can be guaranteed. We are optimistic that the company is a potential high-quality high-dividend investment target.
We judge that cotton prices are currently at a cyclical low level. From the beginning of '24 to 10/31, Zheng Mian/ICE2 cotton futures fell by more than 11%/14% respectively. This was mainly due to the weak recovery in downstream demand and the high forecast for global cotton production for the current year, which led to pessimistic expectations on both the supply and demand sides. However, according to the US Department of Agriculture (USDA) monthly report, the expected value of global cotton production for 2024/25 was continuously reduced in August and September, with a slight increase in October. Among them, the expected annual production value of US cotton fell continuously to 3.09 million tons. It is revising the market's pessimistic expectations about cotton prices, supporting the decline in cotton prices to stop and stabilize.
A major global manufacturer of color spinning, with outstanding production capacity scarcity in Southeast Asia, began reversing the situation in '24 and maintaining a “buy” rating. According to the interim report, about 77% of the company's production capacity is located in Vietnam. The location advantage has established long-term competitiveness, and orders from downstream brand customers are picking up. We are optimistic that the company has entered the quarterly repair stage and maintained profit forecasts. Net profit to mother is expected to be 0.6/0.78/1.02 billion yuan for 24-26, corresponding PE is 13/10/8 times, maintaining a “buy” rating.
Risk warning: The global pandemic affects downstream demand; fluctuations in cotton prices affect profitability; industry capacity supply has increased dramatically.
