\u3000\u3000 Huafu Fashion Co.Ltd(002042) (002042)
Huafu Fashion Co.Ltd(002042) : the global leader in color spinning, actively transforming the layout, and bringing new growth to the industrial Internet
Founded in 2000, the company implements the long-term development strategy of “adhering to the main business and sharing the industry”, runs through the textile and garment industry with yarn, and relies on the industrial Internet and the industrial transformation of flexible supply chain to realize the coverage of the whole industrial chain of “raw materials – spinning – fabrics – clothing”. At present, it has formed a production capacity of 2 million yarn spindles and an annual output of 300000 tons of new yarn.
Since 2018, the company has practiced industrial Internet thinking, opened up the front-end cotton industry, realized digital intelligence manufacturing, laid out the back-end network chain, created an industrial Internet platform, developed a flexible supply chain, and gradually realized industrial transformation and upgrading through value services.
Cotton price rise + digital intelligence upgrading, profitability will be further improved. The revenue of 21q1-3 was 12.715 billion, an increase of 46.84%, and the net profit attributable to the parent company of 21q1-3 recovered to 445 million, turning losses into profits, thanks to the rise of cotton price and the increase of sales orders; In the future, with the gradual advancement of digital intelligence, the production and operation efficiency of the company will be gradually improved, and the profitability is expected to be further improved.
The advantages of main yarn business are stable, and the shared industry strategy promotes the rapid development of network chain business
The rising trend of cotton price may continue, which is good for the company’s performance, binding the national brand and opening up growth space. Color spinning is more fashionable because it shows hazy three-dimensional effect after dyeing and spinning. It saves water and reduces sewage by more than 60% compared with the traditional process, and is more environmentally friendly. The dyeing process is unique and has high science and technology. In the early stage, the production capacity of color spinning was concentrated in eastern China, and then gradually shifted to the West and overseas under the influence of policy support and production factors. At present, the production capacity of Xinjiang and Vietnam are 1 million spindles and 300000 spindles respectively, and the production capacity of Vietnam is relatively low to resist the fluctuation of the epidemic. Affected by Xinjiang cotton, the proportion of Chinese customer orders has gradually increased, and the brand of Huafu deep strategic cooperation has increased steadily. At the same time, the cotton price has shown an upward trend since the second half of 2020 and may continue in the future, which is good for the company’s performance.
The network chain business connects the front and rear industrial chains and realizes transformation and upgrading. Join hands with Xinmian to cut into the upstream cotton market, build an Internet platform for cotton supply chain, extend the modernization of cotton agriculture and provide value-added services, and the front-end network chain system has initially taken shape.
Facing the pain points, actively seeking change, taking the first step of the Internet in the spinning industry and opening up space for long-term growth
There is sufficient space for Internet information technology transformation in the spinning industry. The company actively seeks change, takes the lead in promoting the transformation of industrial Internet, faces the pain points such as low industry concentration, capacity process and labor intensity, improves industrial efficiency and realizes industry integration.
Remarkable results have been achieved in Aksu, Xinjiang. Huafu Industrial Internet started in Xinjiang. The intelligent MES system pushed full-dimensional data to the mobile terminal in real time, effectively improving management efficiency and reducing costs. The first pilot of Aksu factory achieved remarkable results, and the internal cost reduction and efficiency increase have been realized. The output has increased by 10% in the first half of the year.
Export Huafu mode to the industry and provide online trade platform matching services. The company makes full use of its advantages such as orders, cotton, brand premium and full digital management to bind the waist spinning factory to export Huafu digital solutions to the industry; With the increase of the number of connected equipment and factories, we will further open up the upstream and downstream supply and demand and provide B2B online trade platform matching services.
Industrial Internet is an important step in the transformation of Huafu digital intelligence. The full-dimensional data coverage solves the pain points of the industry. In the future, it will gradually extend to the enterprise, assist the management in the overall analysis, help the enterprise realize fine management, effectively improve management efficiency, and finally form a whole enterprise digital management system.
ADA socks took the lead in extending the back-end network chain business and formed synergy with the main yarn industry
China’s cotton socks Market has low concentration and no leading enterprise. OEM manufacturing space is large and scattered. At the same time, consumption upgrading and concept change contain large growth space. Moreover, the sock making process is simple, the degree of automation is high, and the superposition effect of industrial Internet is more significant. Therefore, the company takes socks as the starting point to extend to the downstream consumer end.
ADA socks industry includes four business segments: 1) self owned brand: kalalara makes full use of the advantages of online head brand to grow rapidly; 2) brand authorization: Huafu and ADA customers superimpose advantages to break through the brand authorization end; 3) OEM manufacturing: it is transformed into brand OEM for overseas wholesale markets; 4) Yarn business: downstream feed Huafu yarn sales and cooperate with the main yarn business.
Join hands with kalalara to establish Alibaba University Internet technology, which can help ensure delivery time, quality and profit. With the help of Huafu Industrial Internet experience, Adah socks industry extends the downstream network chain business and realizes the whole process business closed loop; One stop smart factory helps reduce cost and increase efficiency and realize scale effect.
First coverage, buy rating
Huafu Fashion Co.Ltd(002042) mainly engaged in color spinning, with yarn running through the textile and clothing industry. The cotton price will rise in the future, which is good for the performance; Facing the pain points of the industry, the company has actively transformed digital intelligence, implemented the industrial Internet, effectively reduced costs and increased efficiency, exported Huafu model to the industry, helped light asset expansion, and provided value-added services for enterprises; Extend the back-end network chain business, take the lead in developing the socks industry, with high automation, industry attributes and industrial Internet empowerment, which has achieved remarkable results and fed back the main yarn business. We estimate that the operating revenue of the company from 2021 to 2023 will be 17.8 billion yuan, 20.9 billion yuan and 24 billion yuan respectively, the net profit attributable to the parent company will be 530 million yuan, 630 million yuan and 740 million yuan respectively, the corresponding EPS will be 0.31, 0.37 and 0.44 yuan / share respectively, and the corresponding P / E will be 16, 13 and 11 times respectively. The average PE valuation of comparable companies in 2022 is 20 times, giving the company a reasonable PE of 20 times in 2022, with a corresponding share price of 7.4 yuan.
Risk tips: raw material price fluctuations, RMB exchange rate fluctuations, repeated epidemics, order fluctuations caused by China US game, and high industry asset liability ratio.
