\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 339 Bros Eastern Co.Ltd(601339) )
Key investment points
The company released its 2021 annual report & the first quarterly report of 2022: 1) in 2021, the revenue was 7.774 billion yuan / yoy + 26.73%, and the net profit attributable to the parent company was 1.371 billion yuan / yoy + 274.47%. The revenue growth was driven by the recovery of demand, capacity expansion, recovery of capacity utilization, rise of cotton price and other factors. The performance slightly exceeded our previous expectations, mainly due to the rise of cotton price in 21 years, which promoted the gross profit margin of + 15.24pct year-on-year, which exceeded our expectations. Quarter by quarter, the revenue of 21q1-q4 was + 37.5% / 61.3% / 5.7% / 13.4% year-on-year respectively, and the net profit attributable to the parent was + 212.64% / 404.22% / 464.13% / 209.65% year-on-year respectively. The growth rate of Q3 revenue slowed down, mainly because the epidemic in Vietnam affected production in August. 2) 22 Q1: the revenue is 1.975 billion yuan / yoy + 5.4%, and the net profit attributable to the parent company is 345 million yuan / yoy + 54.6%, continuing the rapid growth trend.
Strong demand and rising volume and price jointly promote income growth. 1) In terms of products, the revenue of color spinning / blank yarn in 21 years was + 34.6% / + 13.8% year-on-year respectively, accounting for 62.2% / 33.1% of the total revenue respectively. The rapid growth of color spinning was mainly due to the recovery of demand + the recovery of output + the increase of product price. 2) In terms of component price, the total yarn sales in 21 years were 241800 tons / yoy + 11.77%, and the estimated yarn unit price was about + 13% compared with the same period. The increase in unit price mainly benefited from the increase in cotton price during the year (China / international cotton price increased by 48% / 50% respectively in 21 years), and the company increased the product price accordingly.
3) in terms of regions, the domestic / overseas revenue in 21 years was + 17.1% / + 32.7% year-on-year respectively, and the revenue accounted for 34.6% / 60.1% of the total revenue respectively. Among them, the overseas revenue increased rapidly, which mainly benefited from the transfer of overseas orders to China caused by the different pace of epidemic development outside China in 21 years and the continued strong demand.
Capacity expansion is expected to continue, and capacity utilization is expected to rise year-on-year. 1) Production capacity: as of the end of the year 21, the company’s production capacity was 1.7 million ingots (1.1 million ingots in Vietnam + Shanghai Pudong Development Bank Co.Ltd(600000) ingots in China), of which the production capacity in Vietnam increased by 100000 ingots compared with that in 20 years, corresponding to yoy + 10%. The company plans to raise 1 billion yuan to expand the 390000 yarn project in Vietnam, which has been approved by the CSRC in March 22. The company expects to put into operation about 200000 spindles in 2022 / 2023, which is equivalent to about + 18% of Vietnam’s capacity in 2022. 2) Capacity utilization: 20-year shutdown + sluggish demand leads to an average capacity utilization rate of only 60% – 70% in Vietnam. The capacity utilization rate has rebounded in 21 years. In August, the epidemic in Vietnam was serious, resulting in the lowest capacity utilization rate of Vietnamese factories falling to about 32%. With the improvement of the epidemic, Q4 recovered to about 90% and the annual capacity utilization rate was about 80%. In the 21st year, Vietnam’s Blum achieved a simultaneous increase of 16.42% in revenue and 310% in net profit.
The sharp rise in cotton price + low price inventory promoted a significant increase in gross profit margin. In 21 years, the gross profit margin of the company still achieved a year-on-year increase of + 15.24pct to 26.21% against the background of RMB appreciation, mainly driven by the sharp rise of cotton price and the increase of output during the year. In terms of products, the gross profit margin of color spun yarn / blank yarn increased from + 10.70/22.91pct to 25.58% / 26.65% year-on-year respectively, mainly due to the 48% / 50% rise in China / international cotton prices in 21 years, while the company has 6-8 months of low-cost cotton inventory reserves, which greatly improves the gross profit margin. The gross profit margin of 22q1 continued to + 8.19pct to 26.08% year-on-year, but decreased by 10.31pct month on month compared with 21q4. We judge that there is little probability of further sharp rise in cotton price in 22 years. The company has 4.25 billion yuan of inventory at the end of 22q1, sufficient cotton reserves and low-cost inventory advantages. In addition, the current trend of weakening RMB, 60% of the company’s overseas income and depreciation of exchange rate are favorable.
Profit forecast and investment rating: the company is the leader of color spinning in China. In the past 21 years, driven by strong external demand, capacity expansion of Vietnamese factories, recovery of capacity utilization rate, upward cotton price and other factors, the company has a beautiful performance, and the rapid growth trend of 22q1 performance continues. In the year of 21, the company launched two phases of equity incentive. The exercise conditions are that the revenue in the year of 21-23 is not less than 6.3/64/6.5 billion yuan and the yarn sales are not less than 21 / 22 / 23000 tons respectively. The exercise conditions have been reached in the year of 21. Since March 22, the prevention and control of local epidemics in China has become more stringent, which will lead to the slowdown of downstream demand in China and the accelerated transfer of orders to Vietnam and India. Considering that the gross profit margin of 22q1 has decreased month on month, we will reduce the net profit attributable to the parent company in 22 years from 10.5% to 0.90% year on year. It is expected that the same period will increase by 3.96% / 3.05% in 23-24 years, and the EPS in 22-24 years will be 0.92/0.96/0.99 yuan / share respectively, corresponding to PE 6.1 / 5.8 / 5.7 x, maintaining the “buy” rating.
Risk tip: repeated outbreaks in China and Vietnam, sharp fluctuations in cotton prices, and cotton futures contracts affect performance
