Xinye Textile: Capacity release and government subsidies drive growth in 2017

The company announced its 2017 annual report. In 2017, its revenue was 5.195 billion yuan, a year-on-year increase of 27.16%, and its net profit at home was 292 million yuan, a year-on-year increase of 40.84%. The company found a gold dividend of 0.40 yuan for every 10 shares. From the perspective of various businesses, the yarn business increased by 19.58% to 2.388 billion yuan, mainly due to the release of new capacity, yarn sales increased by 17.21%, grey fabrics and yarn-dyed fabrics were 1.314 billion yuan and 62.1 million yuan, respectively, a small increase. 2.28% and 3.07%, cotton business was 916 million yuan, up 194.93% over the same period. The company established Xinbei Cotton Industry and acquired two companies, Beizheng Guohe and Kefang Cotton, and the number of ginning plants in Xinjiang increased to 10 . The company received government subsidies of 146 million yuan, up from 127 million yuan in the same period last year.

The company's projects continue to be built and put into production, and capacity continues to expand. According to the annual report, the yarn production capacity in 2017 will be 1.7 million spindles. Some of the production capacity will not cover the whole year in 2017, so the production capacity is expected to increase in 2018. The company is currently under construction with an annual output of 20,000 tons of knitted fabrics production capacity, consider the year of construction, commissioning period of one year, 2018 is expected to form productivity. The company of high-end denim project began construction in 2019 is expected to form productivity.

Earnings forecast and investment rating

We expect the company's yarn production capacity and knitted fabric capacity to increase from 2018 to 2020. Based on the above assumptions, the company's EPS for 2018-2020 is expected to be 0.44 yuan/share, 0.51 yuan/share and 0.57 yuan/share, respectively, corresponding to 11 times, 10 times and 9 times for PE. The company's production capacity continues to increase, and the current valuation At historical lows, maintain a “buy” rating.

risk warning

The newly added capacity is less than the expected risk; the cotton price occupies a large cost of the company. Once the cotton price fluctuates greatly, it will cause risks to the operation; the company receives a large amount of government subsidy every year, and once the policy changes, it will have a greater impact on the company's performance. .