\u3000\u3 Shengda Resources Co.Ltd(000603) 558 Zhejiang Jasan Holding Group Co.Ltd(603558) )
Event: in 2021, the company realized an income of RMB 2.052 billion, with an increase of 29.65%, a net profit attributable to the parent of RMB 167 million and a deduction of non net profit of RMB 153 million, turning losses into profits compared with 2020, EPS of RMB 0.43 and a dividend of RMB 0.15 per share (including tax). The company was weakened by the epidemic, the business of cotton socks and seamless clothing resumed rapid growth, and the profitability was improved.
In 2022q1, the company realized a revenue of 532 million yuan, an increase of 28.54% at the same time. The net profit attributable to the parent company was 824849 million yuan, with an increase of 74.10%, and the non net profit deducted was 66.458 million yuan, with an increase of 40.73%. The orders of the company’s new and old customers were large. We estimated that the income of cotton socks achieved double-digit growth, and the income of seamless clothing increased by about 60%, driving the increase of gross profit margin year-on-year and the improvement of the profit of seamless clothing business.
Comments:
The revenue of cotton socks increased rapidly year-on-year, and the seamless clothing business returned to normal. 1) In 2021, the company’s leisure cotton socks and sports cotton socks realized an income of 235 million yuan and 1.268 billion yuan, an increase of 29.75% and 44.26% respectively. The company optimized the customer structure, increased the proportion of sports brand customer revenue, and raised the prices of some products to cope with the rise of raw materials. The company’s Vietnam coastal defense base expanded significantly, the production capacity of China Jiangshan base expanded, and the production capacity of Guizhou began to be put into operation in 21q3, driving the rapid growth of revenue. 2) In 2021, seamless casual wear and seamless sportswear achieved revenue of 160 million yuan and 341 million yuan, with a simultaneous increase of 7.80% and 3.51%. The company’s seamless business strengthened China’s sales team, set up five business departments to expand customers, expanded Guizhou’s seamless production capacity, and gradually realized large-scale production and capacity utilization in Vietnam, laying a solid foundation for future growth.
The gross profit margin increased at the same time, the expense rate decreased, and the net operating cash flow resumed growth. 1) In 2021, the company’s gross profit margin increased by 6.66pct to 26.76% simultaneously, mainly due to the weakening of the impact of the epidemic and the return to normal profitability of the company’s cotton socks business. Among them, the gross profit margin of leisure cotton socks, sports cotton socks, seamless leisure clothing and seamless Sports clothing was 25.27%, 32.28%, 7.04% and 13.85%, with an increase of 4.32pct, 9.41pct, -1.69pct and -2.91pct. In 2022q1, the gross profit margin of the company increased by 1.45pct to 28.05% and continued to grow. 2) In 2021, the company’s sales, management, R & D and financial expense rates increased by -0.24pct, -0.22pct, -0.04pct and -0.64pct to 2.91%, 9.56%, 2.87% and 0.98%. The company’s revenue recovered rapid growth and the expense rate decreased year-on-year. 3) In 2021, the net cash flow from operating activities increased by 4.30% to RMB 271 million, mainly due to the increase of sales and payment collection of the company.
The company strengthens its competitiveness and expands its brand customers. The company strengthened its industrial chain integration, ODM R & D, cost control and other capabilities. In 2021, Guizhou built a new project with an annual output of 2000 tons of spandex, rubber band and coated yarn to provide industrial chain support for the production of seamless clothing and cotton socks, and the production capacity of dyeing and dressing at home and abroad continued to improve; The company pays attention to R & D investment, establishes European companies, employs international high-end talents and improves ODM capability; The company improves the automatic production capacity, strengthens the internal cost control and reduces the production cost. The company continues to strengthen its internal competitive advantage, expand its two major businesses, well-known brand customers at home and abroad, and promote revenue growth.
The company continues to expand production capacity outside China and promote revenue growth. The production capacity of the company’s cotton socks continued to expand rapidly. In 2021, the Vietnamese factory shipped 210 million pairs, an increase of about 35% at the same time. China Jiangshan base shipped 160 million pairs, an increase of 33% at the same time. Guizhou base plans to add 1000 looms and configure 440 looms within the year. Seamless clothing company expanded the production capacity of Guizhou’s peak. In 21 years, the number of seamless looms increased from 173 to 309. The Vietnamese factory has gradually put into operation. At present, the startup rate has reached 70%, laying the foundation for customer expansion. The company will accelerate the construction of Guizhou base and Vietnam Xing’an base, especially the key projects such as Vietnam Xing’an seamless phase II, Guizhou Dingsheng phase II and Vietnam Qinghua phase II, and continue to expand the main business capacity.
Profit forecast and investment rating: due to the short-term impact of 2022q1 epidemic on downstream demand, we lowered the EPS forecast for 202223 to 0.76/0.97 yuan (the original value was 0.81/1.03 yuan), and added the EPS forecast for 2024 to 1.20 yuan. At present, the stock price corresponds to 14.4 times PE in 22 years, and the valuation is at a low level relative to the performance growth rate. The company has improved its global production capacity layout, continuously expanded downstream customers, expanded the production capacity of personal clothes, and maintained the “buy” rating with strong certainty of performance growth.
Risk factors: the impact of the epidemic exceeded expectations, the exchange rate fluctuated sharply, and the expansion of new customers was lower than expected.
