\u3000\u3000 Huafu Fashion Co.Ltd(002042) (002042)
Key investment points
The industrial Internet project will be fully implemented soon to reshape the business model
The industrial Internet pilot has achieved remarkable results. At present, the overall transformation of Aksu factory in Xinjiang has been completed. The company started digital transformation in 2020 and began to connect the 150000 ingot capacity of Xinjiang Aksu plant to IOT + MES system for test in September of that year. The system realizes the visualization and digitization of front-end production machines, and achieves good results in optimizing order allocation, standardizing employee operation and automatically reporting faults. The equipment failure downtime of the pilot plant is reduced by 90%, the equipment production efficiency is improved by 7%, and the finished product output is increased by 10%. By December 2021, the company has completed the digital transformation of all 1 million ingot production capacity in Aksu, Xinjiang (accounting for about 1 / 2 of the company's total yarn production capacity).
The digital management system of the whole enterprise will be implemented in 22 years, and the profit margin is expected to increase 2pct. On the one hand, the company plans to connect all 2 million ingots of Huafu to the industrial Internet platform in 2022; On the other hand, in addition to the digitization of production links, the company will also start from the aspects of inventory management, customer portrait and cost control, and finally form a digital management system covering all links of the whole enterprise. If the project progresses smoothly, we expect the overall profit margin of the company to increase by about 2pct. Under the environment that the average gross profit margin of the spinning industry is only about 5%, the improvement of 2pct will bring great performance flexibility.
In the medium and long term, it will be promoted to small and medium-sized factories to realize industry integration and asset light expansion. Facing the spinning industry with large market scale and low concentration, the company plans to promote its industrial Internet to small and medium-sized enterprises in the industry to solve the problems of capacity order mismatch, low level of personnel management and equipment maintenance of small enterprises; At the same time, through the production status monitoring and order output of small enterprises, the company can effectively realize its asset light expansion; After connecting enough factories and equipment, the company is expected to replace multi-level wholesalers from yarn to cloth, become a platform for matching transactions, and finally improve the overall efficiency of the industry.
From yarn to socks, multi format layout outlines the new blueprint of socks industry
The company established adsu smart Internet in 2020, and completed the M & A of kalala (brand), Boyi (OEM manufacturing) and Yifu (materials) in 2021, realizing the extension from yarn to downstream socks. ADA socks industry will take "independent brand + OEM OEM OEM production" as its two core businesses, and engage in brand authorization and yarn management at the same time, aiming to become the world's leading scientific and technological leader in the whole industry chain socks industry. Seize the opportunity of the absence of new national brand and build a complementary brand matrix. Chinese traditional sock brands are aging and lack of sock brands with both design sense and quality and positioning emerging consumer groups such as tutuanna and happy socks overseas. There is a huge opportunity for the rise of new national brands.
In terms of brand, at present, ADA has laid out three independent brands with distinct positioning: karamella (sweet and lovely), isku (interesting trend) and I look like (simple and light design), and plans to incubate multiple functional brands such as sports, leisure business and medical treatment in 22 years.
In terms of channel, the Kalam era is based on tiktok's self marketing channel (covering Tmall, jowin, Xiao Hong and other platforms), with Tmall fans over 2 million, which has formed a certain head effect. Offline is mainly in the form of distribution joint venture. At present, it has settled in 5000 Watson stores and 600 cool tide play stores in China. It has settled in HEMA since the beginning of 22.
Upstream yarn energization is the key for the company to break through in the traditional socks OEM track. At present, the company has about 2000 hosiery machines and plans to put 5000 hosiery machines into operation in two batches within five years in Aksu Small Commodity Industrial Park, Xinjiang. It is expected to produce 300 million pairs of basic hosiery (the volume will reach the top 3 in China) after the completion of production, so as to provide OEM production business for global brands and channel customers. Extending from yarn to sock production, the most direct synergistic effect is that the procurement cost of cotton yarn of Argentina university is reduced by 2%. At the same time, the advantages in raw material quality control, rapid delivery, development and application of new yarn are further strengthened. In addition, Huafu's powerful customer resources can also greatly reduce the difficulty and cost of market development of Argentina University. We believe that with the advantages of vertical integrated industrial chain, the company can seize a place in the fierce sock OEM market.
A Da digital intelligence internet platform: the industrial Internet of socks industry, integrating Zhuji socks industry chain. Zhejiang Zhuji Datang is a global gathering place of socks industry, accounting for 70% of the national / 30% of the global production capacity, but the industry is highly dispersed and the efficiency of resource allocation is low (the average capacity utilization rate of small factories is only 80%), which has a huge space for Industry integration like yarn. A Da Shu Zhi Internet connects Xinjiang's own socks factory and Zhuji small and medium-sized socks factory through SaaS platform. It can clearly observe the production progress of each factory and intelligently distribute orders. The comprehensive management efficiency and production efficiency of socks factory can be improved by 20%. As the production equipment of socks industry is relatively simple, the construction speed of industrial Internet will be faster than that of yarn, and the efficiency improvement after transformation will be more obvious.
Profit forecast and valuation
After the industrial Internet is fully implemented within the company, the annual output and profit margin of the company will be significantly improved. At the same time, the cotton price still has strong support under the background of shrinking supply and strong demand. The main yarn industry of the company is expected to maintain steady growth. After entering the socks industry, the company will form a huge synergy in the main yarn industry, and the new business has great prospects.
It is estimated that the net profit attributable to the parent company in 21 / 22 / 23 will be RMB 540 / 64 / 740 million, corresponding to the valuation of 17x / 14x / 12x. We are optimistic about the performance flexibility that the company's strategic planning may bring. With the rapid growth of new business, the corresponding valuation system will be gradually switched. At present, there is still much room for improvement in the valuation and maintain the "buy" rating.
Risk tip: the epidemic situation is repeated, and the terminal demand is less than expected
