Report guide
As the leader of color spinning, the company's profitability is expected to be significantly improved under the double benefits of the epidemic repair and superimposed cotton price upward cycle.
Main points of investment
Color spinning industry leader, order repair + cotton price rise, is expected to bring performance recovery company as one of the world's largest color spinning leaders, as of 20H1 has 1.89 million yarn production capacity (of which, Xinjiang 1.1 million spindles / Vietnam 280,000 spindles), can produce 250000 tons of new yarns per year. As one of the duopolies in the field of middle and high-end color spinning, the company has become one of the preferred partners of the world's major brands under the dual advantages of scale and technology, and is also one of the leaders of the world color trend.
Cotton as an important raw material cost of the company, the upward price has a significant pulling effect on the performance. The annual cotton consumption of the company's yarn business is between 250,000 and 35,000 tons, and because its cotton cycle in the warehouse is about half a year, we estimate that the cotton bank used in the main yarn business of the company is between 1.0million and 150,000 tons. As the average price of 20H2 cotton is about 13500 yuan / ton, there is a price difference of 2000 yuan / ton compared with the current cotton price. Therefore, we believe that the existence of cotton prices up and down in the low-price warehouse will bring obvious help to the company's performance.
At the same time, we believe that with the gradual repair of the epidemic, the company's orders from brand customers are also significantly improving, and the re-improvement of capacity utilization also provides a solid guarantee for the recovery of the company's overall performance.
The network chain business remains stable, also benefiting from the improvement of the overall prosperity of the industry. The network chain business is mainly cotton trade, which is mainly a complete set of supply chain service business from cotton planting to processing to warehousing to final transaction. This part of the trade can also provide 8.65 billion revenue and 310 million gross profit over the past 19 years. Although the overall turnover of the network chain business is relatively fast, the rise in cotton prices also plays a positive role in promoting the profit performance of the trade business. In addition, Zhuji Boyi, which the company acquired in Xinjiang generated 77.62 million of its revenue in the first half of the 20th year, and will choose a machine to manufacture socks, gloves and other small goods in the future, in order to make full use of Xinjiang yarn production capacity.
Profit forecast and valuation:
We believe that the rise in cotton prices and order repair will have a more obvious pulling effect on the company's main yarn business; at the same time, the improvement of industrial chain demeanor will also provide assistance for its cotton supply chain business. We expect the company's profitability to improve significantly in 21 years, and performance is expected to return to 19-year levels. It is expected that the annual return net profit in 20-21-22 is-3.73 RMB 465, 000,000 yuan, corresponding to the estimated value of 14.2X/12.5X in 21, 000, 22. In the case of cotton prices are still in the upward cycle, we believe that the company's performance is still more obvious upward flexibility, maintaining the "buy" rating.
Risk hint: the epidemic is repeated again, and the recovery of terminal demand is not as expected.