\u3000\u3 Shengda Resources Co.Ltd(000603) 889 Zhejiang Xinao Textiles Inc(603889) )
The concentration of market share of industry leaders accelerated, driving the performance to exceed expectations
Overall, the advantages of subdivided leaders are gradually emerging. In the past 22 years, Q1 company achieved a revenue of 893 million yuan, a year-on-year increase of 40.24% and a year-on-year increase of 24.59%; The net profit attributable to the parent company was 74 million yuan, with a year-on-year increase of 47.40% and a year-on-year increase of 15.20%, creating the best Q1 performance in history. We expect that the price and quantity of wool worsted yarn will rise simultaneously, and the revenue will increase by 30-40%; The sales volume of cashmere yarn increased significantly, driving the revenue to increase by 80-90%.
In terms of gross profit margin, 22q1 achieved a comprehensive gross profit margin of 17.78%, yoy-1.7pct, mainly due to the rapid increase in the proportion of cashmere yarn business with relatively low gross profit margin. Based on the stability of raw material prices and the increase in the proportion of foreign trade orders with higher gross profit margin, we expect the gross profit margin of wool worsted yarn business to remain at a high level of about 23%. At the same time, based on the sacrifice of market development and the sharp rise of material costs due to logistics, we expect the gross profit margin of cashmere business to be under pressure in the short term.
We believe that after 19 years of Sino US trade war and the epidemic in 20 / 21, the production capacity of small and medium-sized wool textile enterprises with extensive operation has accelerated to be cleared, and the market share of wool textile enterprises with strong profitability is accelerating to increase. From the perspective of the company’s development resumption, we think it can be confirmed to a certain extent. Driven by the positive sales strategy, the company has tight production capacity in 2021, so it needs to continue to help deal with the strong order demand in the downstream through strategic partners; 22q1 sales continued to maintain rapid growth, not light in the off-season.
Young management takes over, and new Australia has been young for 30 years
At present, the company has basically completed the succession of management. Today, the company also issued the succession announcement of the Secretary of the board of directors. In February 21, the company also announced the appointment of general manager Hua as the successor. In terms of the overall structure, the new and old succession of the core management has been completed. We also see that a series of positive reforms led by the young management team are gradually being fulfilled, including positive and detailed sales strategies, active coordination of various departments under the background of broadband business development, new performance evaluation system and incentive mechanism, and the proposal of production based marketing strategies, etc.
Profit forecast and valuation
We expect the company’s revenue to increase by 20% / 15% / 13% year-on-year to RMB 41.3/47.3/5.36 billion in 22 / 23 / 24, and the net profit attributable to the parent company to increase by 30% / 22% / 22% year-on-year to RMB 388 / 473 / 575 million. According to the closing price on April 28, 2022, the corresponding PE from 2022 to 2024 is 7 / 6 / 5x respectively. We believe that 22 years, as a new starting point after the 30th anniversary of the founding of new Australia, is worth looking forward to its growth. Considering that the leading share of the industry is expected to accelerate after the liquidation of the industry, the high outlook of the industry is expected to continue, with considerable potential, and maintain the “buy” rating.
Potential risk factors
Risk of excessive fluctuation of wool price; The expansion of production is less than expected;
