Incident Overview

The 24Q3 company's revenue/net profit to mothers/net profit after deduction was 2.085/0.18/0.148 billion yuan, up 11.39%/-35.71%/corrected year-on-year. Fair value change income generated mainly from holding financial assets (23Q3/24Q3 was 0.398/0.013 billion yuan), that is, revenue contributed to the market rebound in the last few days of September. The decline in net profit was mainly due to the equity income contribution of disposal subsidiaries during the same period of 23, but non-deducted net profit improved quarterly. In the first three quarters of 24, the company's revenue/net profit attributable to mothers/net operating cash flow were 60.74/0.413/0.255/1.244 billion yuan respectively, up 19.29%/-25.37%/138.59%/98.78% year-on-year. The higher net operating cash flow than net profit was mainly due to a decrease in inventory and receivables.

Analytical judgment:

Revenue growth has been slowing quarterly, mainly affected by the base figure. The revenue growth rate of 24Q1-Q3 companies was 23.45%/24.27%/11.39%, respectively, and the growth rate slowed from quarter to quarter.

The deducted non-net interest rate improved quarterly, and Q3 contributed to exchange earnings. The 24Q3 company's gross margin/ net profit margin/ deducted non-net profit margin was 14.04%/8.63%/7.09%, up 10.47/ -6.32/12.12PCT; 24Q3 sales/management/R&D/financial expense ratios were 0.54%/3.94%/1.39%/2.47%, respectively, with a year-on-year decrease of 0.05/0.26/-0.28/2.42PCT. Other income/revenue increased by 0.38 PCT; net income from investment decreased by 20.51 PCT year on year, mainly due to the disposal of equity income from the two subsidiaries in the same period last year; net gain/revenue from changes in fair value increased by 0.37 PCT year on year; and income tax/revenue decreased by 0.12 PCT year on year.

The company's inventory and inventory turnover days have been reduced. In 24Q3, the company's inventory was 4.137 billion yuan, a year-on-year decrease of 16.52%; the number of inventory turnover days was 222 days, a year-on-year decrease of 84 days; accounts receivable were 0.592 billion yuan, a decrease of 3.90%; the number of accounts receivable turnover days was 27 days, a decrease of 2 days; the company's accounts payable was 0.213 billion yuan, a decrease of 13.80% year-on-year, and the number of payable turnover days was 11 days, a decrease of 6 days year-on-year.

Investment advice

We analyzed that (1) in terms of the main business, the company's profit fluctuated greatly in the previous two years due to fluctuations in cotton futures, and underutilization of production capacity and affected profit margins. As downstream demand gradually recovered and product structure improved this year, net profit was repaired quarterly, and fundamentals came out of a trough; (2) in the long run, the company's share increase logic remained unchanged. The importance of Vietnam's layout became more prominent, and the company's production expansion continued; (4) As the company expanded production for a while, The current dividend rate is 6.8%, with attraction. Maintain 24-26 revenue forecast of 7.656/8.338/9.02 billion yuan; maintain 24-26 net profit forecast of 0.561/0.759/0.879 billion yuan, corresponding to 24-26 EPS of 0.37/0.51/0.59 yuan. The closing price of 5.2 yuan on November 1, 2024 was 14/10/9X for PE, respectively, maintaining a “buy” rating.

Risk warning

Cotton price fluctuation risk; risk of falling demand due to inflation in Europe and the US; risk of exchange rate fluctuations; systemic risk.