\u3000\u3 Shengda Resources Co.Ltd(000603) 558 Zhejiang Jasan Holding Group Co.Ltd(603558) )
The cotton socks business reached a new high in the past 21 years, and both ends of seamless supply and demand are ready to go
The company released the annual report of 2021: the operating revenue was 2.052 billion yuan (+ 29.7%), and the net profit attributable to the parent company was 167 million yuan (turning losses into profits); The operating income of Q4 alone was 530 million (+ 22.8%), and the net profit attributable to the parent company was – 13.9 million. 21q4 recorded a loss. On the one hand, due to the shutdown of Shangyu factory for about 20 days affected by the epidemic in December last year, the profit of seamless business decreased by about 6 million; On the other hand, 21q4 recognized many one-time expenses, including 36.53 million employee equity incentive payment expenses, 9.13 million goodwill impairment accrued by Jiangsu Xierong factory, and about 5 million epidemic subsidy for Vietnamese employees.
Cotton socks: high-end new customer Bombas has a large volume, and the gross profit margin has reached a new high. In 2021, the revenue of cotton socks was 1.5 billion (+ 41.8%), and the shipment volume reached 390 million pairs (+ 40%), of which the shipment volume of Vietnam / Jiangshan base exceeded 210 / 160 million pairs, with a year-on-year increase of 35% / 33%. A new 440 hosiery machines in Guizhou base were put into operation in Q3. Based on the rising cotton price, the company adjusted price sensitive customers by raising the price, and the company reserved three quarters of low-cost cotton yarn inventory in early 2021. In addition, the high-end new customer Bombas had large orders and high average price, which led to a significant increase in the gross profit margin of cotton socks business by 8.6pp to 31.2%.
Seamless clothing: Guizhou base has been greatly expanded, and reserve customers are ready to go. In 2021, the revenue was 500 million (+ 4.8%), limited by the epidemic in Vietnam, Guizhou seamless factory was greatly expanded in 21 years (the number of looms increased from 173 to 309), and the transformation from highly centralized customer structure to diversified customer structure was preliminarily completed. As the capacity utilization rate of Vietnam’s seamless factory is still in the climbing stage, and new customers are in the early stage of cooperation, the pricing ratio is low. The annual gross profit margin of seamless business is 11.7%, which has not yet returned to the level of more than 30% 19 years ago.
22q1 rose seamlessly and rapidly, optimistic about the high certainty growth of the whole year
22q1 seamless business revenue and profitability rose rapidly. The company’s 22q1 operating revenue is 532 million yuan (+ 28.5%), and we expect the revenue of cotton socks to grow steadily in double digits. Due to the restorative growth of orders from two old customers, UNIQLO and delta, the revenue of seamless business is expected to grow by about 60%. The net profit attributable to the parent company of 22q1 was 82.46 million (+ 74%) and the net profit deducted was 66.46 million (+ 41%), which was higher than the revenue end. The main reason was that with the liberalization of epidemic control in Vietnam, the start-up rate of factories in Vietnam has increased steadily since the beginning of the year, which is expected to reach 95% +, driving the net profit margin of seamless business to double digits rapidly. Among them, non recurring gains and losses are mainly government subsidies of 17.91 million.
Accelerate the expansion of the two major businesses, and the order situation of the whole year is optimistic. 1) Cotton socks business: under the steady growth of orders, the company plans to add 60 million pairs on the basis of 360 million pairs at the beginning of the year. 2) Seamless business: the company plans to add 100 looms (all in Vietnam base) on the basis of 660 looms at the beginning of the year, which is expected to be put into operation in the first half of the year, and the large amount of orders from new customers IKA will effectively undertake the new production capacity in Vietnam. In addition, the orders from old customers UNIQLO and delta are expected to increase significantly in 22 years, and the orders from new customers Li Ning and H & M continue to grow.
Profit forecast and valuation
As the leading manufacturer of globally integrated cotton socks and seamless clothing, the company has strong main business strength, and the seamless production capacity and customers have come out of the bottom. It is expected that the net profit attributable to the parent company in 22-24 years will be 290 / 3.8 / 450 million yuan, with a year-on-year increase of 74% / 30% / 20%, corresponding to PE of 16 / 13 / 11x, maintaining the “buy” rating!
Risk tips
Repeated outbreaks outside China have led to lower customer orders, production expansion rhythm or capacity utilization than expected
