\u3000\u3000 Huafu Fashion Co.Ltd(002042) (002042)
The main yarn industry has maintained healthy growth, and Q4 is still bright under the slowdown of network chain
Q4 deduction of non net profit reached the best level in recent ten years. It is estimated that the net profit attributable to the parent company in Q4 is RMB 100 ~ 180 million, and the deduction of non net profit is RMB -0.1 ~ 70 million. Since Q4 is the off-season of the company, except 2019q4, the deduction of non net profit in Q4 has been negative since 2012. Q4 the amount of non recurring profit and loss is large, which is expected to be mainly due to the sale of assets.
The demand for yarn orders has warmed up as a whole, and the number of Q4 high units is expected to grow steadily. Over the past 21 years, the global clothing consumption has recovered, the epidemic in Southeast Asia has repeatedly led to the return of some overseas orders to China, and the company has actively explored the Chinese market after the Xinjiang cotton incident. The company has strong yarn orders and the capacity utilization rate has recovered to nearly 100%; Q4 as clothing consumption is greatly affected by the epidemic, the growth rate of yarn revenue is expected to slow down compared with the first three quarters, but there is still a high unit growth, continuing a steady trend.
Q4 cotton price is stable at a high level, and yarn performance continues to benefit. The cotton price continued to rise from 15000 yuan / ton at the beginning of 21 years. After entering Q4, it exceeded 20000 yuan / ton and remained stable at a high level of 22000 ~ 23000 yuan / ton. As the annual cotton consumption of the company is between 250000 ~ 350000 tons, and the cotton inventory is maintained for 3 ~ 6 months according to the market situation, Q4 continues to benefit from a large number of low-cost inventory.
It is expected that the growth rate of Q4 network chain business will slow down, and the socks industry will contribute more than 10 million profits. The network chain business is mainly a complete set of supply chain service business from cotton planting, processing, warehousing to trading. Due to the high short-term increase of cotton price, the transaction volume of Q4 network chain business is expected to decline, and the growth rate is slower than that in the first three quarters. In addition, in 21 years, the company completed the merger and acquisition of kalalara, Boyi and Yifu socks industry, realizing the extension from yarn to downstream socks industry, and Q4 socks industry is expected to contribute more than 10 million profits.
We look forward to the full implementation of industrial Internet and the continuous promotion of socks industry in 22 years
In the next 22 years, it will fully implement the industrial Internet and begin to promote it to small and medium-sized factories. As of December 2021, the company has completed the digital transformation of 1 million ingot capacity in Aksu, Xinjiang. It is expected to complete the transformation of all 2 million ingot capacity of Huafu in 22 years, and begin to promote to small and medium-sized factories in the middle of 22 years. It is expected that the company’s profit margin will be further improved, and realize its asset light expansion while carrying out industry integration. It is expected that this will bring great performance flexibility.
In the past 22 years, the sock industry sector has been continuously promoted, which is expected to bring significant performance increment. On the basis of 21 years of M & A, the company will continue to promote the four business segments of “private brand, OEM manufacturing, brand authorization and yarn management” of the Hosiery Industry in 22 years, continue to incubate a differentiated brand matrix, accelerate the construction of online channels, the entry of online channels and the entry of hosiery machines in Xinjiang, and extend the industrial Internet from yarn to the hosiery industry. It is expected that the performance of the hosiery industry will be significantly thickened.
Profit forecast and valuation
Cotton prices still have strong support under the background of shrinking supply and strong demand, and the company’s main yarn industry is expected to maintain steady growth; At the same time, the industrial Internet and socks sector will have great prospects. It is estimated that the net profit attributable to the parent company in the year of 21 / 22 / 23 will be RMB 600 / 6.5 / 760 million, corresponding to the valuation of 13X / 12x / 10x. We believe that the company’s revenue structure, asset structure and other business models will be gradually changed. Therefore, while the performance is accelerated, the valuation system will be gradually switched. There is great room for improvement in the current valuation and maintain the “buy” rating.
Risk tip: the epidemic situation is repeated, and the terminal demand is less than expected
