Huafu Color Spinning Has Increased Its Flexibility In 2015 Based On A Number Of Uncertainties.

Recently, the 2014 annual financial statements of Huafu color spinning show that Huafu color spinning is one of the leading enterprises in cotton textile industry. In the new year, the company's performance has many uncertainties and elasticity.

In the past 1.2014 years, the operating income was 6 billion 133 million yuan, falling by 1.72%; the net profit attributable to shareholders of listed companies was 168 million yuan, falling by 15.88%; the net profit deducted from non recurring gains and losses attributable to shareholders of listed companies was 28 million 635 thousand and 900 yuan, the same as 78.61%; the net cash flow generated by operating activities was 117 million yuan, with a decrease of 49.80%; EPS0.20 yuan, with a decrease of 16.67%.

On the basis of the total share capital of 833 million shares, the cash dividends of every 10 shares are 0.21 yuan (including tax).

The income will be confirmed in the first quarter of 2015 due to the delayed compensation of 39 million 292 thousand and 600 yuan, which is not confirmed in 2014.

Two

And raw material prices downward, affecting the company's main business gross profit margin in 2014 dropped 1.1 percentage points to 11.12%: 1. In the year, the company accelerated the pace of industrial pfer, realized the pfer of 20% production capacity from the coast to the central part, completed the relocation project of "returning to the city into the garden" in Huaibei, and implemented the trial production of the 60 thousand workshop of the first phase of Vietnam Project at the end of the year.

Capacity pfer will increase the corresponding cost by about 50000000 yuan, and it is expected to decrease by about 30000000 yuan per year after 2015.

2) in 2014 cotton direct subsidy policy led to the new and old cotton market alternately, the annual cotton price fell by 30%, the market wait-and-see sentiment was strong, the industrial chain went to inventory, delayed orders, resulting in a significant decline in the fourth quarter sales, affecting profits of about 30 million yuan.

3., technological upgrading and market structure optimization, relieve pressure on cost rise: 1) in 2014, the company continued to increase R & D efforts, and carried out more than one hundred projects of innovation and technological pformation during the period, with a total investment of over 150 million yuan, 11 new invention patents and 15 utility models patents.

The new product increased by 69%.

2) adhere to the brand fashion trend, lead the trend of color spinning through the form of exhibitions and trend conferences at home and abroad, further optimize the product, market and customer structure, and achieve export sales revenue of 2 billion 79 million yuan, an increase of 4.59%.

4. through a series of mergers and acquisitions, the company is currently the world's largest color spinning enterprise with the largest five production areas in Zhejiang, Changjiang, Huang Huai, Xinjiang and overseas.

By optimizing the allocation of resource elements, giving full play to resource advantages of all localities, implementing specialized and meticulous classification production, speeding up the delivery date and strengthening the advantages of scale procurement.

Among them, the company began the westward strategy since 2006, focusing on the layout of Xinjiang and building a new cotton industry chain. Through mergers and acquisitions and new industrial park construction, the company has now reached 450 thousand spindles in Xinjiang.

In 2014, the state implemented the "million person employment project" in Xinjiang and issued support.

The ten long-term preferential policies of the industry are expected to receive more than 3000 yuan per ton of yarn.

In addition, in the process of capacity layout, the company has accumulated considerable land resources, of which 1530 acres of land already have assets realizable conditions.

5. we recommend the company, first of all, based on the judgement of the recovery growth of the industry chain, the performance elasticity of the leading enterprises of cotton textile industry in 2015 will come from the increase of the order volume and the increase of gross profit margin.

First of all, colored spun yarn is essentially an optional consumer product (colored spinning is often applied to a certain product line in the brand), which is more elastic than that of the A fabric. Secondly, the company's gross margin is relatively low, and a slight fluctuation in gross margin will significantly increase the fluctuation of net profit growth; thirdly, the downward price of cotton will lower the price of the colored spinning products in 2015 as an optional consumer product.

The substitution effect for ordinary yarns is expected to be more obvious.

Finally, benefiting from Xinjiang's support policy, Xinjiang's capacity subsidies will add to the icing on the cake and will further enhance the company's profitability.

Taking into account the 39 million 290 thousand yuan demolition compensation will be included in the company's 2015 earnings report, directly thickening the performance of the year, and increase the company's 2015 earnings forecasts, it is estimated that the net profit attributable to the parent company in the 2015-17 years is 3.26, 3.93, and 452 million yuan respectively, with the increase of 93.73%, 20.43% and 14.92%, corresponding to EPS 0.39, 0.47 and 0.54 yuan respectively.

Refer to the relevant cotton textile leading enterprise 15 years PE interval in 15x-22x, give the company slightly higher than the average valuation level, in 2015 25xPE, corresponding target price 9.8 yuan, buy rating.

6., the main uncertainties are: Overseas recovery is not expected, domestic demand continues to deteriorate and policies affect cotton prices.