Xinye Textile Suffers From "Subsidy Dependency Syndrome", And Government Subsidies Account For Nearly Half Of Profits.

Xinye textile (002087.SZ) frequently received government subsidies, which attracted the attention of the industry. In April 20th, the company announced that it received a government subsidy of 40 million 117 thousand and 200 yuan, and said, "the company receives the above subsidies and related income, and reduces related costs. "

Previously, Xinye textile and its subsidiaries also received government subsidies of 22 million 304 thousand and 100 yuan and 53 million 460 thousand yuan in January 6th and April 2nd respectively. Since 2020, the company has received about 116 million yuan of government subsidies.

" The company enjoys a relatively stable government subsidy and is stable over 100 million yuan in recent three years. We believe that government subsidies will continue to enjoy. Tao Guoding, general manager of Xinye textile, said at the company's 2018 performance briefing.

　　 From the data point of view, Xinye textile receives government subsidies every year in recent years, accounting for almost half of the company's profits. In response, economist Song Qinghui told financial union reporters that the company apparently overly relied on government subsidies, which would make investors doubt their profitability. Although the continuous receipt of government subsidies can highlight the importance and support of local governments for their industries, the company should also improve its performance and avoid government dependency.

Government subsidies account for nearly half of profits.

According to statistics from the associated press, the government subsidies received by Xinye textile and its subsidiaries in 2019 increased the current profit by 155 million yuan. The company received different government subsidies in January 4, 2019, March 1st, April 3rd, July 3rd, October 9th, October 22nd and October 22nd respectively. The annual profits increased by 25 million 129 thousand and 500 yuan, 37 million 348 thousand and 200 yuan, 34 million 509 thousand and 900 yuan, 11 million 339 thousand and 600 yuan, 5 million 366 thousand yuan, 28 million 179 thousand and 600 yuan and 13 million 260 thousand and 500 yuan respectively. And its performance report shows that the company's net profit in 2019 is 290 million yuan.

In addition, data show that in 2016 -2018, the company's revenues were 4 billion 85 million yuan, 5 billion 195 million yuan and 6 billion 59 million yuan respectively, with net profit of 207 million yuan, 292 million yuan and 386 million yuan respectively. Net profit after deduction of non profits was 151 million yuan, 273 million yuan and 362 million yuan respectively. In the three years, the government subsidies for external announcement were 26 million 979 thousand and 700 yuan, 232 million yuan and 129 million yuan respectively.

"Through the profit accounting of government subsidies, we enter into all subjects such as net profit and gross profit in the company's financial statements, but each data will increase or decrease other accounting subjects, which will ultimately affect the non operating income." Xiang Sheng capital executive director Shen Meng pointed out.

He further said, "listed companies will have the role of tax contribution and employment support in local areas, and local governments are more common to support listed companies. Most investors in the A stock market do not care about the fundamentals, but are more concerned about the short term spreads in the face of the company's share price. The government subsidies are good news, which can stimulate the stock prices to rise, and the securities firms and public funds are more concerned about the profitability of the company.

Statistics show that the main business of Xinye textile is engaged in the production and sale of medium and high grade cotton textiles. In the view of the industry, cotton related businesses are also one of the reasons why they receive government subsidies. "Cotton textile fabric involves the purchase of cotton, and it is a support for agriculture, which is bound to be supported by the government. The gross profit of agriculture is low, and half of the government's support to net profit is normal. Cheng Weixiong, an independent analyst in footwear industry and general manager of Shanghai Liang Qi brand, said.

But Song Qinghui believes that "government subsidies account for nearly half of the company's net profit. It is not normal. If the company no longer has the relevant preferential or subsidy conditions, not only will its profit level be directly setback, but it may also cause a huge negative impact on the company's business development, thereby affecting its long-term healthy development."

Decline in performance, new projects questioned

　　 "Excessive government subsidies also reflect the disadvantages of the popularization and competitiveness of fabric factories. Cheng Weixiong said.

From the data point of view, the financial indicators of Xinye textile all showed a downward trend. Its revenue in 2019 was 5 billion 656 million yuan, down 6.66% compared with the same period last year. Operating profit was 341 million yuan, down 18.93% compared with the same period last year. The total profit was 330 million yuan, down 23.56% compared to the same period last year. The net profit attributable to shareholders of listed companies was 290 million yuan, down 24.73% from the same period last year.

In fact, its growth rate has slowed down in 2018. The company's revenue in 2018 increased by 16.64% compared to the same period last year, and its net profit increased by 32.27%. In 2016 and 2017, the revenue growth rate was 34.09% and 27.16% respectively, and the net profit growth rate was 76.97% and 40.84% respectively.

Insiders pointed out that Xinye textile has to face uncertain future. "Affected by the new crown pneumonia epidemic, the performance of domestic garment enterprises is generally low, and it also has an impact on the upstream textile industry. Although the domestic epidemic has eased, the export trade is hard to do, and the demand is slipping down to push the supply side to produce a chain reaction. The clothing and textile industry generally produces early production, and the whole system needs to be prepared ahead of schedule. Cheng Weixiong said.

Yide futures in April 13th released in the industry research report pointed out that the domestic epidemic improved, the pace of enterprise recovery is gradually easing, but inventory and warehouse receipts pressure is still large, the stage of supply pressure still exists, cotton prices in the low position to find support, the two quarter is the real need to test the difficult stage.

Under the epidemic situation, Xinye textile also set foot in the product of "protective materials". The company announced in March 3rd that it will invest in the construction of high-grade textile composite nonwovens in the Xinye textile industrial agglomeration area. The total investment will be 120 million yuan and the construction period will be 6 months. After the completion of the project, it is expected to produce 25 thousand tons of medical, health and protective materials annually, with an annual sales revenue of 425 million yuan and a total profit of 31 million 900 thousand yuan.

It is worth mentioning that the top grade melt composite nonwovens are one of the important raw materials for masks. After the announcement of the company's announcement, on March 4th -6, the stock price in the three consecutive trading days closing price rose or deviated from the value accumulated more than 20%. Some investors questioned the company's suspected hot spots, and pointed out that the construction period of the project was 6 months. Whether the epidemic will be over and the project has not yet been completed will result in the possibility of equipment being vacant.

In addition, the company was also questioned by the Shenzhen Stock Exchange. It was asked to explain the planned production of the high grade textile composite nonwoven production line, and whether it had disclosed the inside story in advance or whether the executives insisted on reducing the holdings. The company replied that the project was a project to be built because the quantity, quality and price of the finished product could be changed, and the company did not accept the relevant order.

"All garment enterprises in the masks and protective clothing transformation is short term, and can not compete with professional medical device enterprises, and its production needs 6 months, time is also difficult to catch up with the epidemic. It does not exclude the idea of squeezed into the mask to stimulate stock prices. Cheng Weixiong told the associated press.

"The overall sales volume of garment enterprises is not good enough, and the upstream industry is also affected. The company should take measures such as offline reemployment and online marketing to reduce the impact of the epidemic on business performance." Song Qinghui said.