\u3000\u3 Shengda Resources Co.Ltd(000603) 889 Zhejiang Xinao Textiles Inc(603889) )
The company released its 2021 annual report. In the 21st, the annual revenue was 3.446 billion yuan, an increase of 52% and the net profit attributable to the parent was 298 million yuan, an increase of 97%. The utilization rate of wool and fine spinning capacity of the company continues to improve, and the cashmere business presents rapid expansion. With the gradual release of production capacity in the future, there is still a large upward space to maintain the buy rating.
Key points supporting rating
In 2021, the wool and fine spinning business of the company made steady progress, and the cashmere business expanded rapidly, jointly driving the growth of revenue. In 2021, the company’s revenue was 3.446 billion yuan (+ 52%), and the net profit attributable to the parent company was 298 million yuan (+ 97%). In terms of products, the revenue of wool fine spinning, wool top, modification treatment, dyeing and finishing processing and cashmere yarn in 2021 reached 20.60/4.95/0.41/830 million yuan, with a year-on-year growth rate of 29% / 25% / – 38% / 324.6% respectively. The growth of each business is mainly driven by the sales volume of products. Among them, the sales volume of worsted business shows rapid growth under the improvement of capacity utilization. The sales volume of wool fine spinning and wool top in 2021 increased by 35.67% / 23.44% year-on-year; In addition, in terms of cashmere business, 2021 was the first full year of the company’s cashmere spinning business, and the capacity utilization rate increased rapidly. Ningxia Xinao cashmere and Duncan, UK jointly promoted business expansion, and the sales volume reached 130178 tons, an increase of 368.27% at the same time.
Promote the production promotion strategy + improve the production efficiency, and effectively control the superimposed expenses to broaden the company’s profit space. In 2021, the gross profit margin was 19.06% (+ 3.95pct) and the net profit margin was 9.09% (+ 2.00pct); In terms of rates, the sales rate is 1.85% (+ 0.27pct), the management rate is 2.99% (-0.76pct), and the R & D rate is 2.78% (-0.39pct). The increase of the company’s gross profit margin is mainly due to its production promotion strategy to broaden customers and improve production efficiency. In terms of specific products, the gross profit rate of wool fine spinning / wool top / modification treatment and dyeing and finishing / cashmere yarn was 23.23% / 8.45% / 28.62% / 13.71%, with a year-on-year increase of + 6.4pct / + 5.7pct / – 3.4pct / – 4.2pct. On the balance sheet side, the contract liabilities reached 73 million yuan at the end of 2021, an increase of 108% at the same time, with strong demand from downstream customers; In addition, the book value of the company’s inventory increased by 11.46 billion yuan at the end of the year, which was mainly the same as that of the company’s subsequent materials, with a positive increase of 20.26 billion yuan.
In the future, the production capacity of wool textile business will continue to be released, the cashmere business will be steadily arranged, and the future space of the company is expected to continue to rise. In terms of wool worsted business, the subsidiary xinzhonghe’s “6000 tons of wool top and 12000 tons of functional fiber modification processing production line project” is now in the stage of equipment installation and commissioning. It is expected that after it is officially put into operation, the wool top and functional fiber modification processing production line project will reach a production capacity of 13000 tons / 22000 tons; At the same time, the company’s mode is transformed into production promotion, which is expected to stabilize old customers and continuously develop new customers (the scene covers multiple subdivided sports fields). Driven by the high prosperity of sports clothing, it is expected to continue to expand downstream demand orders. In addition, the company has successfully expanded the cashmere business of the second growth curve, and will continue to improve the capacity utilization in the future to further expand the business steadily. Under the double growth curve, further open the growth space of the company.
Valuation
It is estimated that the company’s revenue from 2022 to 2024 will be 4.15/49/5.6 billion yuan respectively, and the net profit attributable to the parent company will be 3.83/4.59/545 billion yuan, corresponding to 8 / 7 / 6 times of PE respectively. Maintain a buy rating.
Main risks of rating
Macroeconomic fluctuations; Brand cooperation development is blocked; Exchange rate fluctuation risk.
