Main points of investment
The traditional flat knitting machine business in the main business has picked up and reached the peak of renewal demand in 2017.
Since 2016, the company's computerized flat knitting business has begun to pick up and is expected to grow by 40% in 2016. The main reason for the increase in sales of computerized flat knitting machines is the demand for renewal. At present, there are about 40-500000 computerized flat knitting machines in the stock market. According to the average service life of 8 to 10 years, the computerized flat knitting machine that entered the market in 2008-2011 began to meet the renewal demand in 2016-2019, with a total annual market space of 30-3.5 billion yuan. According to the company's stable market share level of 30%, the annual operating income corresponding to the renewal demand is about 1 billion yuan.
Overseas market expansion is effective, and the demand for machines to replace labor in Bangladesh is determined.
Bangladesh is the sweater producing country second only to China, with about 40-500000 manual flat knitting machines. Now it is in the stage of replacing the computerized flat knitting machine, and the market demand for the computerized flat knitting machine is huge. In the past, the company's exports to Bangladesh have been 3000, accounting for 60 per cent of overseas revenues in 2015, and the company's exports of computerized flat knitting machines are expected to grow by 40 per cent in 2017. According to the export unit price of 75000 yuan, the market space of Bangladesh is 13 billion yuan.
The market potential of the new business shoe upper machine is huge, which is a great breakthrough for the shoe industry.
The growth of the upper machine comes from the increase in permeability brought about by the replacement of the original shoemaking process. Global annual sales of sports shoes are about 8 billion pairs. Assuming that 20 per cent of sports shoes use vamp knitting technology, the demand is 1.6 billion pairs. A vamp machine can produce 5000 pairs of shoes a year, and about 320000 sets of equipment are needed. Calculated according to the price of 70,000-80,000 yuan each, the market space is about 25 billion yuan.
Cixing is the first to set foot in the shoe upper machine business among domestic enterprises, and there is a lot of room for import substitution. From downstream, Anta, Reebok and 361 degrees are all customers of the company. About 3000 shoe upper machines were sold in 2016, which can contribute 200 million to 300 million yuan according to the unit price of 70,000 to 80,000 yuan.
Hangzhou Duoyi Le + Hangzhou YouInvestment is expected to contribute about 100 million yuan in net profit in 2017; Suzhou Dinner turns losses into profits, and Dongguan Zhongtian is on the right track.
In 2016, Cixing acquired a 100% stake in Hangzhou Duoyi Le and Hangzhou YouTou Technology. The two companies are expected to complete the net profit of 70 million yuan bet in 2016, contributing more than 30 million net profit. The bet performance in 2017 was 105 million yuan, which is expected to exceed expectations.
The company holds a 68% stake in Suzhou Dingna and develops a machine vision controller on the platform of Suzhou Mapping Automation, a subsidiary of Suzhou Dinner. At present, Dinna has become the second-class supplier of Apple Inc, mainly producing visual inspection equipment, and is expected to obtain orders for inspection equipment in 2017. Dongguan Zhongtian made a profit in 2015, with a net profit of 2.19 million yuan and a 60 per cent stake in the company. Mainly engaged in robot automatic grinding equipment, AGV intelligent handling car and other business, Dongguan Zhongtian has been on the right track, we expect to generate 100 million revenue and 10 million net profit in 2017.
The price of the first phase of the employee stock ownership plan is now 40% upside down.
The first phase of the company's employee stock ownership plan was lifted for the first time in June 2017. the current stock price is 11.6 yuan, with an upside down of 40%. The second phase plans to purchase a total of 5.75 million shares of the company, accounting for 0.7% of the total share capital of the company, with an average transaction price of 10.17 yuan per share.
Profit forecast and investment suggestion
Taking into account the determined demand for the renewal of computerized flat knitting machines and the import replacement market for shoe upper machines, we estimate that the company's EPS for 2016-2018 will be 0.16 EPS 0.29 Universe 0.35 yuan, corresponding to PE 72-40-34 times, upgraded to the "Buy" rating.
Risk Tips:
The domestic competition pattern of computerized flat knitting machine has changed, the penetration rate of shoe upper machine is limited, and foreign investment is losing money.