\u3000\u3 China Vanke Co.Ltd(000002) 394 Jiangsu Lianfa Textile Co.Ltd(002394) )
Spinning performance is still under pressure. China is a leader in yarn dyed fabrics, covering the whole textile industry chain including cotton planting. Its production capacity includes 320000 spindles of spinning, 100 million meters of yarn dyed fabrics (year-on-year-20 million meters), 78 million meters of home textile fabrics (+ 10 million meters), 72 million meters of printed and dyed fabrics (flat), 7 million pieces of clothing (- 500000 sets), and 6000 tons of knitted yarn and knitted fabric dyeing (flat). Among them, the production capacity of fabrics is located in Jiangsu Province of China, and the production capacity of clothing in China / Cambodia accounts for 61% / 39% respectively. Since 2014, the growth rate of revenue has fluctuated slightly and the profit side has fluctuated greatly. In 2021, the revenue was 3.897 billion yuan / yoy + 0.61% / compared with - 0.35% in 2019 and the net profit attributable to the parent company was 182 million yuan / yoy-61.33% / compared with - 53.7% in 2019. The profit side fell more, mainly due to the decline of gross profit margin of 292 PCT and non recurring profits and losses (the company's income from trading financial assets (mainly funds) was 02 million yuan, a decrease of about 286 million yuan compared with 2020). The revenue of 22q1 was 1.145 billion yuan / yoy + 22.23%, and the net profit attributable to the parent company was 12.36 million yuan / yoy-25.63%. The revenue side increased rapidly, and the profit side decreased, mainly due to the increase of income tax (the operating profit of 20q1 decreased more, resulting in tax rebate).
The growth rate of fabric revenue of leading products increased in 21 years. 1) In 2021, textile and garment / thermal power / other income accounted for 87% / 2.3% / 10.7% respectively, and the income was + 5.06% / + 34.12% / - 27.92% year-on-year respectively. In textile and clothing, the income of fabrics / cotton yarn / clothing / cotton accounts for 57.7% / 15.5% / 8.3% / 5.5% respectively, and the income is + 21.55% / - 60.33% / + 53.05% / - 3.52% year-on-year respectively. The contribution of fabrics and clothing is mainly increased, of which the leading product fabrics are mainly from the contribution of sales growth and clothing is mainly from the contribution of price rise. 2) Fabric products include dyed fabrics (accounting for 51% of the fabric revenue in 2020), printed and dyed fabrics (accounting for 38%) and home textile fabrics (accounting for 11%). The fabric revenue shows a fluctuating and shrinking trend from 2016 to 2020 (CAGR is - 5.8%), among which the income of dyed fabrics, printed and dyed fabrics and home textile fabrics is - 14.8%, + 5.7% and + 127% respectively. Yarn dyed fabrics (mainly used for business shirts) showed a decline, which was mainly affected by the change from consumption trend to leisure. 3) From the perspective of sales area, the company's revenue structure in 2021 is in line with the characteristics of weak domestic demand and strong external demand of China's economy as a whole. The revenue of China / the United States / Europe / Japan is - 3.48% / + 10.38% / + 80.82% / - 60.44% year-on-year respectively, and the revenue proportion is 62% / 15.7% / 12.1% / 0.3% respectively.
The promotion of overseas capacity layout and the recovery of capacity utilization are expected to promote revenue growth. In May 2019, the company announced that it planned to invest in the construction of a high-grade woven garment fabric project with an annual output of 66 million meters in Indonesia. Due to the slow progress affected by the epidemic, the company expects to be put into trial production in mid-2022 and put into operation in 2023q1. With the promotion of Indonesia's production expansion and in order to meet the market demand (for example, the demand for knitted fabrics is better than woven fabrics and home textile fabrics is better than clothing), China's production capacity will be optimized and adjusted accordingly. From 2019 to 2021, the color woven fabric will be reduced from 160 million to 100 million meters, the clothing will be reduced from 8 million to 7 million sets, and the home textile fabric will be increased from 65 million to 78 million meters. In the past 21 years, due to repeated outbreaks in Jiangsu and Southeast Asia, the company's capacity utilization rate was low (74.59% / yoy-4.2pct for fabrics, 74.76% / + 8pct for clothing in China and 65.84% / - 13pct for Cambodia). We expect that with the control of the epidemic and the recovery of capacity utilization, the promotion of overseas capacity layout is also expected to contribute to future growth. The acceleration and trend of income growth in 22q1 has been reflected.
Gross profit margin declined in 21 years and is expected to rise in 22 years. In 2021, the company's gross profit margin was - 2.92 PCT to 15.82% year-on-year, of which the gross profit margin of cotton yarn / fabric / other products was + 6.46 / - 7.57 / - 11.55 PCT to 18.59% / 14.57% / 6.01% year-on-year respectively. The decline of gross profit margin is mainly affected by the appreciation of RMB and the rise of raw material costs: 1) the company's exports account for nearly 40%, and the appreciation of RMB in 2021 will reduce the gross profit margin space; 2) In the 21st year, China's / international cotton prices rose by 48% / 50% respectively, adding to other raw materials such as coal (the highest increase in the price of power coal in the year was 272%) and the rise in the price of additives, which dragged down the gross profit margin. 22q1 RMB appreciation pressure eased and cotton prices fluctuated at a high level. The company's gross profit margin increased by + 1.56pct to 15.71% year-on-year. We judge that the trend of RMB will weaken in 2022, the probability of cotton price continuing to rise sharply is not high, and the gross profit margin of the company is expected to continue to rise.
Profit forecast and investment rating: the company has gradually extended from the leader of color spinning to the layout of the whole industrial chain. In recent years, the demand is relatively weak, which is mainly affected by the shift of industry consumption trend to leisure and the Xinjiang cotton incident. In 2021, the decline of gross profit margin and non recurring profits and losses put pressure on the performance. The revenue of 22q1 achieved good growth and the gross profit margin also increased. The performance of 22 years is expected to achieve rapid growth on the basis of low base. It is estimated that the net profit attributable to the parent company in 202224 will increase by 34% / 13% / 11% year-on-year respectively, and the EPS will be 0.74/0.84/0.93 yuan / share respectively, corresponding to PE11 / 10 / 9x. Considering that the large amount of trading financial assets on the company's account may cause performance fluctuations, the company will be given a "neutral" rating for the first time.
Risk tips: RMB exchange rate fluctuation, cotton price fluctuation, epidemic deterioration, etc.
