Bros Eastern Co.Ltd(601339) (601339)
Main points
According to our analysis, considering Bros Eastern Co.Ltd(601339) the ability of price increase after Q4 cotton price rose higher than expected and Vietnam’s capacity utilization rate restored to 90%, the annual net profit is expected to exceed the expectation, raise the profit forecast and reiterate the recommendation.
Investment advice
In the short term, the performance of 21q4 may exceed expectations: (1) the capacity utilization rate of Q4 Vietnam has recovered to 90%; (2) the price of Q4 cotton has exceeded expectations and exceeded 22700 yuan / ton. The company has the ability to follow the rise of cotton price. We calculate that every 1000 yuan rise in cotton price is expected to contribute 140 million yuan to the performance elasticity.
In the medium term, (1) The company’s fixed increase project will increase the production capacity of 390000 ingots in Vietnam. We estimate that 200000 ingots are expected to be put into operation respectively in the next year and the next year; (2) The company’s low-cost cotton inventory in Vietnam is expected to continue. According to Q3 data, we estimate that the company’s cotton inventory is about 8 months, so Vietnam’s low-cost cotton inventory is expected to remain until the first half of 22 years. It is expected that the net profit in 23 years will decline, mainly affected by the increase of cotton price cost side.
In the long run, we put more emphasis on the company’s non cyclical growth logic, that is, the improvement of bargaining power brought by the increase of the company’s share. In addition, focus on the company’s growth with the expansion of Shenzhou, the largest customer.
Considering the impact of the epidemic situation in Ningbo and Vietnam on Q4 capacity utilization, the revenue forecast for the year 21 / 22 / 23 was adjusted from RMB 8.459/93.02/10.537 billion to RMB 7.859/93.94/11.039 billion. However, considering the improvement of profitability brought by the company’s price increase ability, the forecast of net profit attributable to the parent company was adjusted from RMB 1.15/12.7/16 billion to RMB 1.320/15.67/1.431 billion and the corresponding EPS were RMB 0.88/1.04/0.95 respectively, maintaining the buy rating; The safety margin refers to the average repurchase price of the company (RMB 3.7) and the exercise price of equity incentive (RMB 3.93 / 4.33).
Risk statement
Downside risk of cotton price; Epidemic risk in Vietnam; Exchange rate fluctuation risk; Risk that the commissioning progress is lower than expected; Systemic risk.
