Huafu Color Spinning: 2015 Benefited From The Recovery Of The Cotton Textile Industry Chain

Hua Fu

It is one of the world's largest producers of colored spun yarn, accounting for about 50% of the market share of spinning yarn and 1 million 300 thousand spindles of capacity, mainly in Xinjiang, Zhejiang and central China.

Relying on product oriented technology innovation advantages, the company has developed 8 major product lines and more than 2000 varieties of high-grade cotton color spinning series, healthy environmental protection color spinning series, appearance product color spinning series, functional products color spinning series, etc.

At the same time, through a series of mergers and acquisitions, the construction of the company's capacity base has basically been completed, and has entered the stage of scale benefit release. It has realized the supply chain management ability of multiple varieties, small batch, fast delivery and positive response.

The company's judgment of capacity pfer is the trend of the times, and actively explore overseas markets. From the recent market sales situation, the proportion of overseas business has improved significantly.

We

In the short term, the company's future performance gains will come back to normal after the fall of cotton prices. The demand for replenishment will drive the next year's orders to improve obviously, plus the expected increase in gross profit margin. In the long run, at the industrial level, the recovery of overseas demand and the integration of printing and dyeing sectors will serve as an investment logic to support the leading enterprises of cotton textile industry.

At the company level, on the one hand, to speed up the layout of overseas markets, along with the gradual application of new production bases in Vietnam, low cost raw materials, labor and large-scale production are expected to consolidate their cost advantages. It is expected that the contribution of endogenous growth to profits will gradually be reflected. On the other hand, the company continuously promotes the upgrading of raw materials, colors, processes, technologies and equipment, giving the brand higher added value. The successful development and promotion of the two new series of designers and environmental protection are expected to sustain steady growth of the performance.

In addition, the company's 1/3 capacity in Xinjiang, Xinjiang textile industry implementation of the ten major policies are expected to significantly improve the company's performance.

Forecasts and investment proposals.

Taking into account the regional policy support and the company's own product range optimization to enhance the price competitive advantage, and promote the continuous improvement of the color selection rate and the rate of placing orders, and in the overall upward trend of the industry, combined with the spontaneous promotion power, the performance elasticity of 2015 is expected to be more significant than that of the similar enterprises.

It is estimated that the net profit attributable to the parent company in the 2014-16 years is 2.02, 3.01 and 389 million yuan respectively, increasing 0.88%, 48.97% and 29.38% respectively, corresponding to EPS 0.24, 0.36 and 0.47 yuan respectively.

Give the company slightly higher than the average valuation level, 2015 18xPE, corresponding to the target price of 6.50 yuan, buy rating.

The main uncertainties.

Overseas recovery is not expected, domestic demand continues to deteriorate.