The Second Leading Companies In China: Profit Growth Of Printing And Dyeing Industry Is Over 10%.

Event

The company published its annual report, earning 7 billion 534 million yuan in 2018, net profit 799 million yuan, and net profit of 662 million yuan. If excluding the influence of the purchase of hundreds of passengers, the company's main business income increased 13.4% to 3 billion 960 million yuan, net profit increased 8.9% to 720 million yuan, and net profit increased 2% to 580 million yuan. To 18Q4, the company's original business income increased 5.1% to 1 billion 10 million yuan, and the net profit grew to 1 billion 10 million yuan.

In terms of dividends, the company plans to add 2 shares to every 10 shares, and distribute 2.5 shares in every 10 shares, and at the same time distribute cash dividends of 2.80 yuan, and the proportion of cash dividends to 31.53%.

Investment points

Printing and dyeing industry: the overall acceptance is smooth. In the 18 years, the revenue of printing and dyeing business increased by 11.9%, and the total profit increased by 10.4%. The profit level was basically the same as last year.

In 2018, the company's overall textile business revenue increased by 13.72% to 3 billion 670 million yuan, and the sales of woven / knitted products increased by 9.2%/17.7% to 1 billion 170 million M /4.6 million tons, respectively, and the gross profit margin decreased by 0.72pp to 26.3%, which was mainly related to the decline in profitability of the nonwoven business (due to relocation affecting production).

Specifically to the printing and dyeing business, 18 years of printing and dyeing industry above Designated Size Enterprises in 18 years, 1-11 months production capacity of 44 billion 500 million meters (+2.26%), the airline is the second leading companies in the country, the capacity reaches 1 billion 20 million meters, the market share is close to 2%, the income increased 11.9% to 3 billion 336 million yuan in 2018, and at the same time, with the loss of the printing and dyeing enterprises above Designated Size reached 19%, the average annual net interest rate of civil aviation's printing and dyeing sub companies reached the level of 18, and the main industry performance was very robust.

Thermoelectric steam business: in the context of stable coal prices, profitability has picked up slightly, with revenue increasing by 19.4% to 680 million yuan, and total profit increased by 12% to 140 million yuan.

The main raw material of thermoelectric business is coal. The fluctuation of coal price in this year is less than 17 years and the average price has decreased slightly, which has promoted the effective profitability of the thermoelectric business. The gross profit margin has increased by 2.1pp to 24.8% compared with the same period, and the net interest rate of the related subsidiaries has increased by 1.1pp to 17.7%.

Other businesses: Shipping profits declined significantly.

Wholesale (mainly coal sales), water conservancy management and machinery manufacturing business, the 2018 milk year's overall revenue growth is healthy and the profit level is steady. Shipping business is declining due to the decline of profitability. The net profit of shipping subsidiaries is down 8 million 730 thousand yuan compared with the same period last year.

Gold business: 18 years in December, we bought jewelry manufacturing enterprises, hundreds of passengers, and made a significant profit increase.

Founded in 2003, hang min Tai Tai has established gold jewelry processing services for the old temple gold, Lao Fengxiang, Ming licensing jewelry and man Caron brand. At present, it has the capacity to produce 80 tons of gold ornaments annually.

Originally it was the assets controlled by the major shareholder of Hang min group (hang min group / ring crown jewellery shares 51%/49%). In December 18, the civil aviation shares were purchased by 100% yuan at 1 billion 70 million yuan, and the acquisition was carried out through the issue of shares. The issue price was 9.72 yuan / share.

The performance commitments made by civil aviation and hundreds of Thailand are respectively 7200/8500/10200 million yuan in 18/19/20, and the compound growth rate is close to 20%. In 2018, the revenue and net profit of civil aviation and hundreds of Thailand reached 3 billion 570 million /7711 yuan, exceeding the promised performance.

Interpretation of the 18 year profit: printing and dyeing and thermoelectric profit growth of more than 10%, the acquisition of civil aviation 100 Thai one-time cost, non-woven business and shipping business profit decline is the main reason why the net profit growth is slower than the revenue growth.

Looking back at 12018 years, the total profit of the company's printing and dyeing business increased by 10.4%, and the total profit of the thermoelectric business increased by 12%. The total profit of other businesses decreased from 56 million 560 thousand yuan in 2017 to 20 million 550 thousand yuan in 2018, which was mainly affected by the following factors: 1) the one-time cost of the acquisition of civil aviation 100 Thai was about 18 million 110 thousand yuan; 2) the net profit of the nonwoven subsidiary was reduced by 16 million 800 thousand yuan compared with that in 17 years; 3) the net profit of the shipping subsidiary was lower than that in the year of 2013.

We believe that the first two factors will disappear in 2019, thereby eliminating the impact of the two factors. The net profit of the company's original business in the past 18 years (excluding gold and table) should reach 610 million yuan, an increase of 7% over the same period last year.

Profit forecast and investment suggestion

Looking ahead to the company's earnings in 2019: 1) without considering the gold business, the original main business continued to grow by 10%, and the net profit from the former was eliminated from the preceding analysis. The net profit of the net income of the acquisition cost and nonwoven business increased by 10% yuan to 670 million yuan; 2) the civil aviation 100 Thai company is expected to continue the profit growth trend of 20% or so, contributing to net profit of more than 90 million yuan; therefore, we estimate that the 19 year profit of the company will reach 760 million. If we consider that 19/4/1 will start to reduce the value-added tax rate of the manufacturing industry, it is expected to be even higher than that of the 10%.

Without considering the value added tax reduction, it is estimated that in 19/20/21, the company's profit to the parent company increased by 16%/12%/12% to 7.7/8.6/9.6 billion yuan respectively. Corresponding to PE10.2/9.1/8.2X, the historical cash dividend rate remained at about 30%, underestimating the value of the industry and giving it a "buy" rating.

Risk warning

The price of raw materials such as dyes, coal and gold fluctuated, and the development of gold processing business was not as good as expected.