In-depth research and development in the field of new materials applications is expected to become an important pillar of performance growth as a global leader in safety protection products. Henghui provides users with one-stop professional hand protection solutions in many application fields, such as comfortable air permeability, anti-cutting, anti-cold, anti-oil, waterproof, thermal insulation, anti-corrosion and so on. The company focuses on the R & D, production and sales of hand safety protection equipment. At the same time, we will further increase the research and development, production and application development of ultra-high molecular weight polyethylene fiber and its composite fiber in the strategic new material industry. At present, the company's products are mainly functional safety protection gloves with "fiber + coating" dual protection structure. These safety gloves can not only effectively protect the safety of the hands of users, but also effectively improve the functions of the hands under special working conditions, therefore, the products are widely used in mechanical processing, automobile manufacturing, construction engineering, agriculture and fisheries, mining and metallurgy, petrochemical, electronic manufacturing, outdoor equipment and many other fields.

2023H1 performance is in line with expectations, looking forward to the recovery of orders in the second half of the year in 2022, the company realized operating income of 893 million yuan, a decrease of 5.94% over the same period last year, and revenue of 441 million yuan, an increase of 6.39%.

Divided into categories, functional safety protection gloves are the company's main products. 2023H1, realized revenue of 421 million yuan, an increase of 7.54%, accounting for 95.41% of the revenue. The company expects that in the second half of the year, with the improvement of the prosperity of the industry, the recovery of the domestic and foreign trade environment, and the release of the production capacity of the core product MetalQ engineering yarn, economic anti-cutting gloves, etc., the export order volume of functional safety protective gloves will be significantly increased.

The company's gross profit margin fluctuated slightly. In 2022 / 2023H1, the company's gross profit margin was 25.05% and 22.10% respectively, and + 2.08pct/-1.31pct respectively compared with the same period last year. In 2022, on the basis of a slight decrease in income, the company's net profit increased, with a return of 122 million yuan, an increase of 31.49%.

2023H1 realized a net profit of 42 million yuan, a decrease of 3.43%.

Security gloves have broad prospects, and the company has innovated R & D and technology for many years. China is the country with the fastest growth in the scale of the personal protective equipment industry in the world, and the scale of the domestic personal protective equipment industry is growing at a rate of about 15% every year. According to the number of employees in the construction, mining and manufacturing industries in the European Union, the United States and Japan and the import volume of functional safety gloves in these areas in 2021, the per capita consumption is converted. Based on this, it is estimated that the potential market demand for functional safety gloves in China is about 4.448 billion US dollars, far more than that of other countries and regions.

The company has many years of innovative research and development and technological precipitation in the field of ultra-high molecular weight polyethylene fiber. The company's research on UHMWPE fiber can be traced back to 2015. On the basis of ploughing the functional safety protection glove industry, it continues to explore and extend to the upper reaches of the industrial chain. After nearly 8 years of innovative research and development and technological precipitation, continuous research and development of production preparation and process technology and other aspects of research and development, has formed a highly flexible production capacity. UHMWPE fibers of different specifications from 50D to 1600D can be produced on a large scale. As of May 2023, the company has obtained 15 invention patents directly related to new material technology and production preparation technology, 18 utility model patents, graphene composite ultra-high molecular weight polyethylene fiber and its preparation method have been granted invention patents in the European Union, Japan, the United States, China and so on. The company has established a relatively perfect intellectual property system related to the production of ultra-high molecular weight polyethylene fiber.

Continuously promote product and technology development

2023H1 achieved the conclusion of a number of scientific research projects, such as ultra-soft and high wear-resistant polyurethane gloves, GE sewing machinery anti-cutting gloves, latex heat-sensitive embossed gloves, color dot nitrile product development, 13-needle HPPE palmrest high wear-resistant latex lines, etc., which effectively promoted the improvement of product quality and accelerated launch of new products, while major breakthroughs were made in the development of glossy and curing degradable gloves. In the field of superfiber new materials, on the basis of industrial coordination, the company accelerates the industrial application and development of ultra-high molecular weight polyethylene fiber.

2023H1, the company continues to optimize and improve the film-forming performance of economical anti-cutting yarn, successively completed the small-scale and pilot-scale experiments of formula "BV9" and "BV10", set up a special research and development group to focus on the mechanical properties and creep of fiber and fabric, and discussed and studied the application of UHMWPE fiber in wind power industry with colleges and universities and industry experts.

Construction of domestic and foreign dual market sales system

In terms of export market development, on the basis of stabilizing the original market share and competitive advantages of North America and Europe, the company has intensified the development of emerging markets for export, and deepened customer cooperation in Australia, Turkey, Nordic and other countries and regions. Strengthen the channel layout of core products. In terms of domestic market development, the company has comprehensively entered the domestic security glove consumer market with new independent sub-brands-Boxing Sheng, BESTGRIP, NXG and so on. By optimizing and integrating independent brand marketing programs and strengthening the overall layout of industrial supplies major customer channels and circulation wholesale channels, a relatively perfect marketing network foundation has been formed. At the same time, the company actively responds to the national implementation of B2B Sunshine Purchasing platform strategy, plans and builds an e-commerce operation team, develops professional scenarios for different categories, and continues to provide cost-effective products and services.

With the completion of major projects and the commissioning of new materials, the industrialization of new materials injects growth power into the sustainable development of the company. With the completion and commissioning of the company's fund-raising projects, the release of the production capacity of 3000 tons of superfiber new materials, the promotion of the first phase of the security industrial park, the "annual output of 72 million dozen functional safety protection gloves" and the second phase of the strategic new materials project. The company's two-wheel drive development strategy with "functional safety protection gloves + superfiber new materials" as the core will be effectively broken through and promoted, and the industrial application of superfiber new materials will inject new growth power and performance growth point into the company's sustainable development. 2023H1 Company accelerates the construction of Hengshang material subsidiary "Development and Application Project of Super Fiber New Materials and functional Safety Protective equipment" and production line running-in, process preparation technology breakthrough, production line quality improvement and efficiency. In the same period, the company accelerated the construction of Henghui Security Industrial Park project, the first phase of the industrial park "annual output of 72 million dozen functional safety protection gloves project".

Coverage for the first time, giving a "buy" rating

The company continues to invest in the strategic new materials industry UHMWPE fiber and its composite fiber, and continues to achieve breakthroughs in the industrialization of new materials and applications in other fields. We estimate that the operating income of the company in 23-25 is 1.277 million yuan, respectively, and the net profit from home is 1.39 billion yuan, respectively. The net profit from home is 1.90 million yuan, and the EPS is 1.66 yuan per share, and the corresponding PE is 19max, 14exp. 11x, respectively. With reference to the comparable company valuation, we believe that the company's security glove line products have advantages in the industry and have the potential to continue to expand the global market, giving the company a 23-year PE of 24X, corresponding to a target price of 23.04yuan.

Risk hints: international trade policy risk, exchange rate fluctuation risk, raw material price fluctuation risk, technology research and development risk, growth risk, low market value risk, etc.