\u3000\u3 Bohai Water Industry Co.Ltd(000605) 138 Zhejiang Sunrise Garment Group Co.Ltd(605138) )
Event overview
The annual report was lower than expected, and the first quarterly report met expectations. In 2021, the company’s revenue / net profit attributable to the parent company / net profit deducted from non attributable to the parent company were 51.57/2.91/159 million yuan respectively, with a year-on-year increase of 10% / – 1% / – 34%. Non economic mainly included 37 million yuan of government subsidies, 89 million yuan of investment income (including 76 million yuan of dividends received from investing in extraordinary shares, and investment income from selling some shares and changes in fair value), 17 million yuan of other non operating net income, 21 million yuan of other non economic income The impact of income tax is – 24 million yuan. The company distributed 0.108 yuan per share, with an annual dividend rate of 41% and a dividend rate of 2%. The revenue / net profit attributable to the parent company of 21q4 was RMB 1.569 billion / 57 million respectively, with a year-on-year increase of 31%/-36%. The revenue accelerated month on month (21q3 revenue +8%) and the net profit decreased month on month. 22q1 company’s income / net profit attributable to the parent company / net profit deducted from non attributable to the parent company were RMB 1.373/0.62/0.70 billion respectively, with a year-on-year increase of 31% / 43% / 62%, slightly higher than expected.
The company has issued a plan for convertible bonds, and plans to issue convertible bonds of no more than 850 million yuan for a period of six years. The raised funds are used for: 1) the project of printing and dyeing production line with an annual output of 48000 tons of high-grade knitted fabrics (phase I), with a total investment of 303 million yuan and a proposed investment of 220 million yuan; 2) the construction project of 100000 spindles of yarn in Vietnam, with a total investment of 402 million yuan and a proposed investment of 300 million yuan, 3) Shengzhou Shengtai 22mwp distributed photovoltaic power station construction project has a total investment of 88 million yuan and plans to invest 55 million yuan. 4) information construction project has a total investment of 25 million yuan and plans to invest 20 million yuan. 5) supplement working capital of 255 million yuan.
Analysis and judgment:
Ralph Lauren returned to the first largest customer position, and the revenue growth was mainly contributed by the recovery of capacity utilization. In 2021, the revenue of knitted garment / woven garment / knitted fabric / woven fabric / yarn / entrusted processing business was RMB 2.283/14.88/5.52/4.29/2.62/19 billion respectively, with a year-on-year increase of 34% / 2% / 28% / 12% / – 18% / – 94%. In terms of component price, the volume increase of knitted garment / woven garment / knitted fabric / woven fabric was 49% / – 5% / 34% / 30% respectively, and the price increase was – 10% / 8% / – 4% / – 14% respectively. The volume increase was mainly due to the improvement of capacity utilization, The capacity utilization rates of knitted clothing / woven clothing / knitted fabric / woven fabric were 113% / 81% / 102% / 83% respectively, with a year-on-year increase of 35 / 3 / 36 / 4pct. In 2021, the revenue of Ralph Lauren / UNIQLO / lacoste / FILA / hugo boss was 789 / 5.65 / 5.45 / 5.15 / 315 million yuan respectively, with a year-on-year increase of 42% / – 15% / 3% / 3% / 21%. The top five customers accounted for 53% in total.
The gross profit margin declined due to the impact of raw materials, energy and transportation costs, and the gross profit margin of 22q1 has improved month on month. In 2021, the company’s gross profit margin was 15.87%, a year-on-year decrease of 4.14 PCT, mainly due to the sharp rise in the price of raw materials and energy, and the overseas production was blocked due to the epidemic, poor shipping and other factors. The company ensured that the company’s products could be delivered on time by air, resulting in an additional freight of more than 80 million yuan. The gross profit margin of 21q4 company was 14.5%, down 1PCT month on month. The gross profit margin of 22q1 company has improved and increased by 3.17pct month on month.
The decrease of net profit rate is affected by gross profit rate, and the decrease of employee salary drives the decrease of management expense rate. In 2021, the company’s net profit margin was 5.83%, a year-on-year decrease of 0.49pct, mainly due to the decline of gross profit margin. From the perspective of expense rate, the sales / management / Finance / R & D expense rate was 3.0% / 4.9% / 1.4% / 1.9% respectively, with a year-on-year increase of – 0.2 / – 0.9 / 0.2 / – 0.2pct. The decrease of administrative expense rate was mainly due to the decrease of employee salary. Investment income / income increased by 0.63pct to 0.57%, net income / income from changes in fair value increased by 1.34pct to 1.63%, credit impairment loss / income decreased by 0.2pct mainly from the reversal of provision for bad debts of accounts receivable, and asset impairment loss / income increased by 0.17pct mainly from the increase of inventory falling price provision. Non operating income / revenue increased by 0.21pct to 0.35%, mainly from liquidated damages and compensation income. The income tax rate was 10%, down by 7pct, mainly due to the increase in deferred income tax liabilities due to the appreciation of consolidated assets of enterprises not under the same control, changes in the fair value of trading financial assets and depreciation of fixed assets. The net profit margin of 21q4 was 3.89%, a year-on-year decrease of 3.8pct and a month on month decrease of 0.74pct, mainly due to the decline of gross profit margin. The net profit margin of 22q1 was 4.66%, a year-on-year increase of 0.4pct and a month on month increase of 0.8pct. 22q1 has been improved.
The stock of raw materials increased. At the end of 2021, the company’s inventory was 1.193 billion yuan, with a year-on-year increase of 66%, mainly due to the increase of raw material preparation. The company’s accounts receivable turnover days were 49 days, a year-on-year decrease of 7 days, and accounts payable turnover days were 46 days, a year-on-year decrease of 4 days.
Investment advice
In the short term, after 22 years of recovery from the epidemic, the company is expected to see the improvement of capacity utilization, the delayed price increase of products caused by the rise of raw materials in 21 years and the improvement of gross profit margin in 22 years. In the medium term, the company’s 22-year and 23-year raised investment projects are expected to be put into operation gradually, with an additional production capacity of 2400 tons of knitted fabrics (+ 13%) and 9.2 million pieces of knitted garments (+ 29%). In addition, the company’s convertible bond project will increase the production capacity of knitted fabrics and yarns. After all the projects are put into operation, the company’s production capacity of knitted fabrics will increase by 255% compared with the current one; In the long run, there is more room for the company to improve its net interest rate. The revenue of 22 / 23 years was 6.377/7.269 billion yuan, the new 24-year revenue was 8.309 billion yuan, the net profit of 22 / 23 years was 415 / 500 million yuan, the new 24-year net profit of 582 million yuan, the EPS of 22 / 23 years was 0.75/0.90 yuan, the new 24-year EPS was 1.05 yuan, the closing price of 10.74 yuan on April 18, 2022, the corresponding PE was 14 / 12 / 10x, and the target market value of 8.3 billion yuan and the corresponding target price were 14.9 yuan, Maintain the “buy” rating.
Risk tips
Fluctuation risk of raw materials; Exchange risk; The issue of convertible bonds is uncertain; Capacity expansion is less than expected; Trade friction risk; Systemic risk.
