Huafu Fashion (002042) Annual Report Comments: Expected short-term demand weighs on performance and is optimistic about Vietnam ‘s capacity expansion

Core point of view The company’s operating income and net profit increased by 13 in 18 years.

58% vs. 10.

98%, net profit after deduction can replace 22.

85%, 18Q4 company’s revenue and net profit are subdivided into 4 respectively.

1% and 72.

38%, the decrease in profit was mainly due to the provision for asset impairment losses and the decrease in government subsidies.

78%, net profit decreased by 21.

47%, the decrease in profit was mainly due to the decrease in government subsidies.

The annual report company plans to envisage a dividend of 0.

35 yuan.

  In 18 years, the company’s comprehensive gross profit margin temporarily decreased to 0.

67pct, the overall cost control during the period is too much, the year is basically flat, and the company’s accounts receivable at the end of the first quarter increased by 6 earlier.

13 %%, the inventory increased by 8 earlier.

39%. Net cash flow from operating activities changed from negative to positive for ten years.

In terms of business, the production capacity of the yarn business was ordered in 18 years, reaching 1.89 million spindles at the end of the year, and revenue increased by 22.

68%, gross margin increased by 0.

68pct (removing the influence of accounting adjustment, the yarn’s comparable caliber gross margin can be improved and reset); due to the sluggish 18Q4 cotton price, the net chain business has experienced a decrease in growth rate and a large revenue increase.

32%, accounting for 49% of the total revenue, the gross profit margin extended to 0.

88 points.

In terms of different regions, domestic sales in 18 years increased by 32 years.

36%, export sales temporarily decreased by 36.

69%.

  The downstream demand forecast affects sales and profits. In the long run, the company’s leading advantage in the color spinning sub-industry is still obvious.

Under the environment of weak downstream demand, the company’s revenue and gross profit margin of yarn products have also been affected to some extent.

  In the long term, the downstream application areas of color-spun yarns have been continuously expanded, and domestic environmental 四川耍耍网 protection regulations have become stricter. The process characteristics of color-spun yarns after dyeing and spinning have also promoted the increase in the percentage of yarn-spun yarns in the entire yarn market.

The increasing barriers to technology, capital, R & D, branding and customer resources in the industry are conducive to the expansion of industry leaders such as Huafu.

Facing the uncertainty of the trade war, the company will actively expand new space, new categories, and new customers with its scale and technological advantages to further reduce costs and increase efficiency.

  In terms of yarn business, the company disclosed in December 18 that it plans to invest 25 million US dollars to increase production capacity in Vietnam by 500,000 spindles (long-term planning of 1 million spindles), replace the introduction of new capacity in Xinjiang, and shift production to the smallest area. The company’s extension will remainSteady growth.

Relying on the supply chain resources of Xinjiang, the network chain business will maintain a rapid growth in revenue in the future.

  Financial Forecast and Investment Recommendations According to the annual report, we lower the company’s income and other income forecasts for the next three years, and the company’s 2019-2021 earnings are expected to be 0.

54 yuan, 0.

60 yuan and 0.

66 yuan (the original forecast for 19-20 years is expected to be 0.

62 yuan and 0.

72 yuan), referring to the average valuation of comparable companies, giving the company a 14-year PE estimate for 19 years, corresponding to a target price of 7.

56 yuan, downgraded the company rating to “overweight.”

  Risks suggest that the domestic and foreign cotton prices and the RMB exchange rate will fluctuate, the increase in production capacity will be less than expected, and the Sino-US trade friction.