Jiaxin Silk: Pformation Brand Is Worth Looking Forward To

Existing

The price of silk rose rapidly, from 220 thousand / ton to 360 thousand / ton in the past year. The upstream part of the company controlled the purchase of cocoons, and prepared the materials at low prices for 3-6 months in advance. In the short term, it benefited from the increase in the price of products brought about by the increase in the price of raw materials. The Future Ltd could ease the pressure of raw materials by reducing the proportion of blending and reducing costs.

The company's existing export oriented OEM business grew steadily. In the first three quarters, the company's revenue increased by 18.8%, and its net profit increased by 23.9%. The growth rate was higher than that of the China Daily, and the gross profit margin increased 0.5 percentage points to 19.7%.

The key point of future development is to build domestic brands, ready for development.

Forging domestic high-end brand of high-end silk garments and home textiles is the company's strategic direction and future development priorities.

In the next few years, the proportion of foreign trade planned by the company will be reduced from 75% to 65%, and the proportion of domestic sales will increase to 35%.

The original domestic brand "golden three towers" has a low positioning. In the future, it may take the development route of many brands through the purchase of international high-end brands or self construction.

The company is striving to build a terminal consumer brand, including hiring professional planning team, expanding the designer team, visiting shop location and so on. The above measures will help companies pform from OEM enterprises to brand retailers.

Raise investment projects steadily.

The technical pformation project of silk wide fabrics and special embroidered decorative silk fabrics will be completed by the end of November at the end of the year with the pformation of the original empty factory buildings. The annual output of 1 million 100 thousand high-grade silk knitted garments will be 1 years ahead of schedule to January next year, and the remaining 2 items will be progressing slowly.

The implementation of the stock raising project improves the mechanization and automation level of the company, which can reduce dependence on labor and benefit the company's long-term development in the context of rising labor costs.

Increase the implied value of land increment

The office building project announced in August 3rd, with a budget cost of 230 million, was delivered at the end of 2012, and plans to sell some office space and all commercial premises abroad. It is estimated that 190 million of the funds will be recovered.

The land was purchased by way of listing in January 2008, a total of 22 mu, with a cost of 1 million 700 thousand mu, which has risen to about 4000000 / mu.

In addition, the average price of the more than 400 acres of industrial park is 250 thousand / mu (the cost is about 38 thousand / mu). The company also owns 25 cocoon stations (about 8 acres per unit, and the cost is very low).

The substantial appreciation of these lands has brought about the upgrading of hidden assets.

The existing business provides margin of safety, and the brand pformation space is huge.

Without considering the brand pformation of the company, we expect 2010-2012 years EPS to be 0.57, 0.87 and 1.15 yuan respectively. We believe that the valuation of the existing business is basically reasonable, providing a margin of safety for the company's stock price, and the successful pformation of the brand building will open the space for the future growth of the company, and will bring about double enhancement of the performance and the valuation.

Because of its unique product characteristics and China's monopoly resources, silk has broad market prospects in the field of high-end garment home textiles. At present, the silk scale brand in the market is still blank, and the company speeds up the expansion of domestic brands, so that there will be huge room for future development.

But different business models also put forward a great challenge to company management. We will pay close attention to the progress of domestic brand building.

Considering the company's existing business value, future brand expansion value and implied value, give the "buy" rating.