\u3000\u3 Bohai Water Industry Co.Ltd(000605) 138 Zhejiang Sunrise Garment Group Co.Ltd(605138) )
Matters:
Company announcement: on March 28, 2022, Zhejiang Sunrise Garment Group Co.Ltd(605138) released the performance forecast for the first quarter of 2022. It is estimated that the net profit attributable to the shareholders of the listed company in the first quarter of 2022 will be 61 million yuan to 73 million yuan, with a year-on-year increase of 42.2% to 70.2%. It is estimated that in the first quarter of 2022, the net profit attributable to shareholders of listed companies after deducting non recurring profits and losses will be 58 million yuan to 66 million yuan, with a year-on-year increase of 33.6% to 52.0%.
Guoxin textile and clothing view: 1) latest performance forecast: new capacity is released, capacity utilization is improved, and Q1 performance is expected to increase by 42 ~ 70% in 2022; 2) Outlook: from January to February, the industry grew steadily, the pressure of rising costs still exists, but it is relatively reduced. The recovery of overseas consumption combined with the easing of trade relations is optimistic about the recovery of the whole year; 3) Risk tips: repeated epidemics, less than expected capacity ramp, less than expected efficiency improvement, and sharp fluctuations in raw material prices; 4) Investment suggestion: new capacity climbs, capacity utilization recovers, cost pressure is controllable, the company is optimistic about the rebound in annual performance, and maintain the "buy" rating. In the first three quarters of 2021, the company's performance was under pressure under the multiple negative effects of tight freight, delayed order delivery, rising prices of raw materials and rising freight. In 2022, with the recovery of overseas epidemic and the easing of trade relations, the income of the company's overseas brand customers is expected to recover. With the completion of China's garment base, the company strengthens cooperation with FILA, Li Ning and other major Chinese customers, and Chinese orders are expected to grow rapidly. We are optimistic that the company will achieve revenue growth in 2022 driven by the climbing of new capacity, the improvement of efficiency and the recovery of capacity utilization. At present, the pressure on raw materials and freight costs is still controllable. We maintain the profit forecast. It is estimated that the net profit in 2021, 2022 and 2023 will be 3.1/4.3/580 billion yuan respectively, with a year-on-year increase of 4.3% / 40.3% / 35.9%, corresponding to 18 ~ 19xpe in 2022, maintain the target price of 13.9 ~ 14.7 yuan and maintain the "buy" rating.
Comments:
Latest performance forecast: new capacity is released, capacity utilization is improved, and Q1 performance in 2022 is expected to increase by 42 ~ 70%
In the first quarter of 2022, the company expects to realize a net profit attributable to the parent company of 61 ~ 73 million yuan (42.9 million yuan in Q1 of 2021), an increase of 42.2 ~ 70.2% at the same time, and the net profit range is 67 million yuan, + 56.2%. It is expected to deduct non net profit of 58 ~ 66 million yuan, an increase of 33.6% ~ 52.0%, and deduct non net profit of 62 million yuan, + 42.8%. The substantial increase in net profit was mainly due to the good overseas orders, the continuous and steady growth of Chinese orders, the continuous release of the company's new production capacity and the significant improvement of production capacity utilization, as well as the confirmation of a small number of orders delayed in 21 years due to the shortage of freight in Q1 of 22 years.
Outlook: from January to February, the industry grew steadily, the pressure of rising costs still exists, but it is relatively reduced. The recovery of overseas consumption and the easing of trade relations are optimistic about the recovery of the whole year
1. From the perspective of textile and garment industry, from January to February 2022, the amount of China's garment export and Vietnam's textile export increased by 5.9% / 19.1% year-on-year respectively (from January to February 2021, 15.8% / 10.6% year-on-year respectively). The order growth trend of China's and Vietnam's textile and garment industry is good.
2. From the perspective of cost pressure, the pressure on the company's gross profit margin in the first three quarters of 2021 is mainly due to the sharp rise in the price of raw materials and high freight. In 2022, under the background of global inflation and tight freight terminals, the pressure of rising costs still exists, but from the trend, the year-on-year growth rate has an inflection point, and this part of the pressure is expected to be partially transmitted to the terminal.
1) from the perspective of raw materials, the main raw material purchased by the company is yarn. Considering the fast transmission speed of cotton yarn price and high correlation with cotton price, we mainly observe the quarterly average price change of cotton price here (there is an error with the actual situation, for reference only). If the company's raw material inventory + order is about 3 ~ 4 months, theoretically 2022q1 still faces great pressure of cost increase (year-on-year + 52%), Since 2022, the cotton price has been stable at about 22700 yuan / ton. We expect that the year-on-year rise of Q2 cost is expected to be slower than Q1. If there is no significant adverse rise in raw material prices, the pressure is expected to be partially transmitted to the terminal.
2) from the perspective of freight, the comprehensive freight rate index and Southeast Asian route price index still showed an upward trend from the beginning of 2022 to the beginning of February 2022, and then faced an inflection point and began to decline to the level in the second half of 2021.
3. Looking forward to 2022, the growth of the company comes from the new capacity climbing, the improvement of per capita efficiency brought by intelligent system and the recovery of capacity utilization. On the one hand, the overseas epidemic control has been gradually liberalized, and the consumption of international clothing brands is recovering rapidly. On the other hand, the United States has exempted 352 import tariffs, and the trade relations have eased. The company is expected to strengthen the cooperation with international brand customers (Ralph Lauren, French crocodile, etc.). In addition, the company's Chinese garment production capacity has been increasing in volume and efficiency, and has gradually deepened cooperation with Chinese FILA, Li Ning and other brands. We are optimistic about the growth of orders at home and abroad and the rebound of performance in 2022.
Investment suggestion: the new production capacity is climbing, the production capacity utilization rate is restored, and the cost pressure is controllable. We are optimistic about the rebound of the company's annual performance and maintain the "buy" rating. In the first three quarters of 2021, the company's performance is under pressure under the multiple negative effects of tight freight, delayed order delivery, rising prices of raw materials and rising freight. In 2022, with the recovery of overseas epidemic and the easing of trade relations, the company's overseas brand customer income is expected to recover. With the completion of China's garment base, the company strengthens cooperation with FILA, Li Ning and other major Chinese customers, and Chinese orders are expected to grow rapidly. We are optimistic that the company will achieve revenue growth in 2022 driven by the climbing of new capacity, the improvement of efficiency and the recovery of capacity utilization. At present, the pressure on raw materials and freight costs is still controllable. We maintain the profit forecast. It is estimated that the net profit in 2021, 2022 and 2023 will be 3.1/4.3/580 billion yuan respectively, with a year-on-year increase of 4.3% / 40.3% / 35.9%, corresponding to 18 ~ 19xpe in 2022, maintain the target price of 13.9 ~ 14.7 yuan and maintain the "buy" rating.
Risk tips
The epidemic situation is repeated, the production capacity climbing is less than expected, the efficiency improvement is less than expected, and the price of raw materials fluctuates sharply.
