\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 987 Zhejiang Hangmin Co.Ltd(600987) )
Focus on the dual main business of “textile printing and dyeing + gold jewelry”. Founded in 1998, the company focused on the main business of printing and dyeing in the early stage. After listing in 2004, the company successively developed businesses such as shipping, sewage treatment and thermal power through mergers and acquisitions. In 2018, the company acquired Hangmin Baitai to develop the gold jewelry business. At present, a diversified business matrix of “printing and dyeing + gold jewelry” and supporting coordination of other businesses has been formed. In 2020, the revenue was 5.233 billion yuan / yoy-21.83%, of which the revenue of textile / gold jewelry was – 20.21% / – 25.64% year-on-year, accounting for 50.81% / 31.78% and + 0.15pct / – 2.21pct year-on-year respectively. 2021q1-q3 revenue yoy + 91.21% / compared with the same period in 2019 + 39.55%, net profit attributable to parent yoy + 5.41% / compared with the same period in 2019 – 15.53%. The income side has returned to the pre epidemic level.
In 2021, the printing and dyeing textile business showed a recovery trend. The company’s printing and dyeing business is mainly engaged in dyeing, printing and finishing processing, with an annual processing scale of 1.02 billion meters, ranking in the forefront of the industry. With the weakening of the impact of the epidemic and the recovery of output, the revenue and profit of printing, dyeing and textile business in 2021h1 are recovering, but there is still a certain gap compared with the level before the epidemic. 1) Revenue side: the revenue of printing and dyeing business in 2021h1 was + 43.7% year-on-year / 3.2% lower than that in 2019h1. 2) Profit side: due to the incomplete recovery of dyeing fee prices, the rise of raw materials (such as printing and dyeing auxiliaries) and energy prices, and the increase of sewage treatment costs, the total profit of printing and dyeing textile business in 2021h1 increased by 25.6% year-on-year / decreased by 32.3% compared with 2019h1. In the second half of 2021, the external demand is booming (the export revenue of the company’s printing and dyeing business accounts for more than 60%) and the cost is optimized (the sewage treatment expenditure basically disappears). We expect that the annual printing and dyeing business revenue in 2021 is expected to slightly exceed the level in 2019, and the recovery degree of profit side is also better than that in the first half of the year.
The gold jewelry business is divided into two modes of “processing + wholesale”. The sales volume of the processing mode accounts for a relatively high proportion and the income contribution is low. 1) Processing mode: customers (mainly famous gold jewelry brands such as Laomiao gold, Lao Feng Xiang Co.Ltd(600612) , Zhejiang Ming Jewelry Co.Ltd(002574) etc.) provide gold raw materials. The company provides processing services and charges processing fees. The profit characteristics of this mode are “low sales unit price and high gross profit margin” (sales unit price of 4 million yuan / ton and gross profit margin of 73% in 2020). 2) Wholesale mode: the company purchases gold raw materials to produce gold jewelry and sells it at the price of “gold benchmark price + processing fee”. The profit characteristics of this mode are “high sales unit price and low gross profit margin” (in 2020, the sales unit price is 430 million yuan / ton and the gross profit margin is 0.5%). In 2020, the proportion of gold jewelry processing / wholesale sales was 88.7% / 11.3% respectively, and the proportion of revenue in gold business was 6.8% / 93.0% respectively.
The income of gold jewelry increased significantly in 2021. 2021h1 China National Gold Group Gold Jewellery Co.Ltd(600916) jewelry consumption recovered, the company increased marketing efforts, gold jewelry revenue significantly exceeded the pre epidemic level, and profits need to be further recovered. 1) Revenue side: gold jewelry revenue in 2021h1 was + 226.3% year-on-year / 77.5% higher than that in 2019h1, of which sales volume was + 75.2% year-on-year; 2) Profit side: the total profit of gold jewelry in 2021h1 was + 19% year-on-year / 16% lower than that in 2019h1. The year-on-year growth of gold jewelry sales and profit is lower than that of revenue. We speculate that this is mainly due to the increase in the proportion of wholesale business sales with high sales unit price and low gross profit margin, which effectively drives the growth of revenue, but its profit contribution is limited. When the company acquired Hangmin Baitai in 2018, Hangmin Baitai promised that the net profit deducted from non parent company in 2018 / 2019 / 2020 would not be less than 72 million / 85 million / 102 million yuan respectively, and the targets were achieved in 2018 / 2019. It was not completed in 2020 due to the impact of the epidemic and postponed to 2021. Combined with the performance of 2021h1 gold business, we judge that H2 gold business structure is expected to be optimized and the annual performance commitment is expected to be realized.
Profit forecast and investment rating: the company focused on the dual main business of “textile printing and dyeing + gold jewelry” and the supporting coordination of other businesses. The revenue side recovered well in 2021, but the profit margin was reduced due to the rise of printing and dyeing costs and the increase of the proportion of gold business (the revenue of textile / gold business accounted for 38.1% / 58.2% in 2021h1, and the sales profit margin was 13.46% / 1.9% respectively), and the profit improvement was limited. The gold jewelry business was established in 2021. Hangmin Kohl jewelry (holding 51%) will promote the upstream and downstream coordination of the gold business. At present, the printing and dyeing industry is still relatively scattered, but Hangmin, as a leader, is expected to benefit from the improvement of bargaining power brought by the improvement of industry concentration in the future under the environment of stricter environmental protection. We expect that the net profit attributable to the parent company will increase by 9.6% / 9.6% / 8.6% respectively from 2021 to 2023, corresponding to PE of 9.3x / 8.5x / 7.8x, which will be rated as “overweight” for the first time.
Risk tips: repeated epidemics, rising costs, fluctuations in gold prices and continued reduction of shareholders’ holdings.
