Blum Oriental (601339): Vietnam expands production & improves domestic sales due to higher-than-expected non-recurring items contributing to profit elasticity

Blum Oriental (601339): Vietnam expands production & improves domestic sales due to higher-than-expected non-recurring items contributing to profit elasticity
The company, as one of the domestic duopoly oligopoly, has always focused on its main business and has taken the lead in distributing Vietnam, constantly optimizing its product structure and improving its core competitiveness.In 1Q1, Vietnam ‘s expansion of production and improvement in domestic demand led to a 13% increase in revenue. The profit end was affected by the increase in investment income in the current period and the floating profit of cotton futures, which increased by nearly 40%.Looking ahead to 2019, the gradual recovery of the internal downstream demand side and the continuous expansion of Vietnam’s production capacity are expected to resume steady growth. At the same time, the optimization of the product structure and the increase in Vietnam’s contribution will drive the overall net profit margin to increase.At present, the total market value is 80 million, corresponding to 19PE14X. Considering the solid fundamentals of the company, Vietnam’s expansion of production can effectively avoid the risks of the Sino-US trade war, and is conducive to the improvement of profitability, maintaining the “prudent recommendation-A” investment grade. The low base and Vietnam ‘s capacity expansion drive higher-than-expected revenue growth, increasing investment income and increasing profit elasticity.1Q1 company revenue increased by 13 in ten years.07% to 15.1.8 billion; affected by increased investment income and cotton futures positions floating profit, operating profit increased by 43.41% to 1.3.5 billion, net profit attributable to mothers increased by 39 each year.85% to 1.23 ppm; achieving basic profitability.08 yuan. Vietnam ‘s base capacity expanded steadily and domestic demand picked up, driving revenue growth by 13%, exceeding market expectations.Separately, 1) the company ‘s Vietnam-based real estate sales have been booming, ending the end of 18 Vietnam ‘s production capacity reached 700,000 佛山桑拿网 ingots, accounting for 50%, and it is expected to produce 20 / 100,000 ingots in 19/20.Dada 1 million ingots, accounting for 60% of Blum’s total production capacity.2) The rebound in demand drove the growth of domestic orders in Q1 to positive. Although the gross profit margin decreased and the expense ratio increased slightly, under the influence of the increase in non-recurring income, the net profit margin increased by 1 in 19Q1.55pct to 8.09% 1) Affected by rising raw material prices, rising labor costs, and changes in product structure, the overall gross profit margin in 19Q1 fell 2.54PCT to 15.72%. 2) In 19Q1, the overall expense rate level increased by 0.05pct to 12.92%.The sales expense ratio decreased by 0.06pct to 1.99 points; management expense ratio (including research and development) increased by 1.33pct to 6.61%; financial expense ratio decreased by 1.21 points to 4.32%. 3) Investment income increases every year and the increase in floating profit of cotton futures improves the elasticity of net profit.1) 19Q1 company realized investment income of 62.18 million yuan, an increase of 29.62 million yuan a year.Mainly due to the increase in investment income contributed by Shanghai Trust.2) 19Q1 gains from changes in fair value of 35.79 million yuan, each increase of 3896 million, mainly due to the floating profit of cotton futures positions this year. The increase in the stocking of cotton and other raw materials and the increase in the inventory of finished yarn products led to the inventory being under pressure at the end of 19Q1, and cash in operating activities showed a net replacement status.At the end of 19Q1, the company’s inventory scale increased by more than 47.87% to 49.33 ppm; Affected by the difference in the timing of collection of goods, the proportion of accounts receivable increased by 32.88% to 6.52 trillion; net cash reduction from operating activities 3.53 trillion, an increase of 2 over the previous quarter.2.7 billion. Profit forecast and investment advice: As one of the domestic duopoly duopoly, the company always focuses on its main business, takes the lead in Vietnam, and continuously optimizes its product structure to enhance its core competitiveness.With the gradual release of Vietnam’s production capacity, it is expected that the double-digit increase in the company’s production capacity in 2019 will further strengthen the company’s ability to receive orders.At the same time, the increase in the proportion of Vietnam’s production capacity will also allow the company to further enjoy savings advantages, regardless of valuation.Certainty interference is expected to promote the company’s overall profitability. It is expected that EPS for 2019-2021 will be 0.38 yuan, 0.43 yuan, 0.50 yuan, the company’s current market value of 800,000 yuan, corresponding to 19PE14X, taking into account the company’s solid fundamentals, Vietnam’s expansion of production can effectively regulate the risks of the Sino-US trade war, and increase the profitability of the property, maintain the “prudent recommendation-A” investment rating. Risk reminders: the risk of sustained domestic demand growth; the risk of fluctuations in the RMB exchange rate; the risk that Vietnam’s capacity expansion will not meet expectations.