Zhonghe Shares: Benefit From Textile Industry Boom

　　 Textile and clothing The industry recovery has made the company's performance increase, which is in line with our expectations. In the first half of the year, the income of the public and the stock companies reached 518 million yuan, up 26.04% from the same period last year, of which the parent company realized a revenue of 197 million yuan, an increase of 37.24% over the same period last year. The substantial increase in the income of the parent company has benefited from the revival of the textile and garment industry as well as the consolidation of printing and dyeing business orders to the dominant enterprises. In addition, the efficiency of the IPO medium and high grade casual fabrics weaving project has been put into operation in 9.8 months. With the increase of business volume of Xiamen Huayin in the two quarter, the subsidiary's printing and dyeing business increased revenue by 20% in the first half of the year. The company's growth is in line with our expectations.

In the first half of the year, the gross profit margin of parent company increased, which made the company's performance greatly improved. In the first half of the year, the company realized operating profit of 48 million 795 thousand and 900 yuan, an increase of 65.42% over the previous year, of which the parent company realized a profit of 17 million 503 thousand and 500 yuan, an increase of 372.57% over the same period last year, and realized a net profit of 45 million 244 thousand and 700 yuan, an increase of 61.84% over the same period last year, of which the parent company achieved a net profit of 20 million 70 thousand yuan, up 179.92% over the same period last year. The gross profit and net profit of the company increased significantly because the average gross profit margin of the company increased by 0.8 percentage points (23.13%) compared with that of the previous year. The average gross profit margin of the parent company was 21.97%, an increase of 1.95 percentage points compared with that of the previous year, and the average gross profit margin of the subsidiary was 23.83%, which was basically flat during the same period. In the first half of this year, a substantial increase in the company's performance was mainly due to the substantial growth of the parent company's performance.

Act as Fujian Fabric leading enterprises in the textile industry group will continue to benefit from industry concentration. With the increasingly stringent requirements of the state for environmental protection in the printing and dyeing industry, the concentration degree of the industry will increase in the future. Company as Fujian Textile industry cluster The leading enterprises in China will continue to grow in the recovery of textile and garment industry. In the first half of the year, the company has benefited from the "order to focus on the dominant enterprises", Future Ltd will continue to benefit.

Downstream of the fabric -- expanding the brand apparel industry chain will increase the company's new profit growth point. The company invested in establishing a joint venture with SVC in France, and acted as the sole agent of the Krief Group's "NEWMAN" clothing brand in China. (the company promised that in the next two years, there will be no less than 120 NEWMAN stores in Greater China and no less than 400 in the next five years). Brand clothing will become a new growth point for the company in the future.

It is worth noting that the change of future projects is not enough. In the first half of the year, the company issued 61 million 700 thousand shares in public and actually raised 417 million yuan. The proposed investment projects are: "13 million 200 thousand M liquid ammonia tide cross-linking finishing fabric construction project" and "22 million meters high grade printing and dyeing fabric production equipment technical transformation project". However, at present, the implementation of the "22 million meter high grade printing and dyeing fabric production equipment technical transformation project" main workshop land is rejected by the Xiamen Municipal Planning Bureau. The project is temporarily unable to continue to implement. Future Ltd's fund-raising investment is worthy of attention.

Continue to give the company "recommended" investment rating. We predict that the company's EPS will be 0.33, 0.47 and 0.62 yuan in 10-12 years, corresponding to the 10 to 12 year dynamic price earnings ratio of 25.88, 18.32 and 13.77 times. Continue to give the company "recommended" investment rating.