\u3000\u3 Bohai Water Industry Co.Ltd(000605) 138 Zhejiang Sunrise Garment Group Co.Ltd(605138) )
Due to the increase of raw materials and freight costs, the net profit deducted from non-profit decreased by 34% in 2021. In 2021, the company realized a revenue of 5.16 billion yuan, with a year-on-year increase of 9.7%. The revenue of yarn / woven fabric / knitted fabric / woven clothing / knitted clothing increased by – 18% / + 12% / + 28% / + 2% / + 34% respectively. The growth of knitted fabrics and ready-made clothes is due to the recovery of demand, the release of production capacity and the climbing efficiency. The woven category is subject to the repeated overseas epidemic, and the growth rate is still relatively weak. The gross profit margin is 15.9%, – 4.2 percentage points, mainly due to the increase of raw materials and transportation congestion, which brings an additional freight of 80 million yuan. The ratio of sales + administrative expenses decreased by 0.9 percentage points. The net profit after deducting non recurring income decreased by 34%, while the non recurring income increased and the income tax rate decreased, and the net profit was flat at 290 million yuan.
The cost pressure was gradually controllable, and the net profit increased by 43% in the first quarter. In the first quarter, as the company’s new production capacity continued to climb, overseas transportation basically returned to normal, and some unrecognized revenues in the third and fourth quarters of last year were successively recognized in the first quarter, the company achieved an overall operating revenue of 1.37 billion yuan, a year-on-year increase of + 30.5%. With the slowdown in the rise of raw material prices, the gross profit margin was 17.7%, down from – 1.4 percentage points year-on-year, but improved by 3.2 percentage points month on month compared with the fourth quarter; The net interest rate was 4.5%, year-on-year + 0.4 percentage points.
Outlook: this year, the cost pressure is expected to be reduced, and the ramp up of production capacity and the improvement of efficiency contribute to the growth. 1) Cost: in 2022, the price of cotton is flat, and the freight rate has continued to decline since mid February. At the same time, the price increase of orders is expected to reduce the cost pressure. 2) Customer: European and American consumer demand rebounded rapidly, and Ralph Lauren’s recovery led to a 42% increase in orders in 2021; The company is one of UNIQLO’s five strategic suppliers and is expected to deepen cooperation in the future; FILA and Li Ning are leading sports brands with excellent growth. At present, the company has formed close cooperation with FILA (accounting for about 17% of FILA), and is expected to strengthen the cooperative relationship with Li Ning through the joint venture. 3) Production capacity: the company issued a plan for convertible bonds and plans to expand 48000 tons of knitted fabrics and 15000 tons of yarn. The active expansion of production capacity and efficiency improvement will drive the stable and rapid growth in the next 2-3 years.
Risk tip: epidemic control leads to shutdown, sharp rise in raw materials, weak demand and systemic risk.
Investment suggestion: optimistic about capacity expansion and efficiency improvement, and maintain the “buy” rating. The company has a scarce yarn fabric garment integration mode in the industry. At the same time, it cuts into the supply chain of high-end big brands through better fabric development capacity and high production efficiency. With the recovery of production capacity utilization after the epidemic, the active expansion and production of new production capacity and the construction of intelligent system driving the continuous improvement of production efficiency, we are optimistic about the medium and long-term growth of the company. Considering that the price of raw materials is still high this year and the cost pressure is large, we slightly lower the profit forecast. It is estimated that the net profit from 2022 to 2024 will be RMB 360 / 4.5 / 550 million (compared with RMB 410 / 510 million in 20222023), an increase of 26% / 22% / 21% at the same time. The company’s current valuation is 12.85 12.85 2 12.85 0 12.85 12 12 12 12 12 8 12 12 8 12 8 12 12 12 12 12 12
