Tianhong Textile's medium-term net profit growth of more than 40% of the denim clothing business is expected to achieve growth engine

On August 15, Tianhong Textile Group (02678) held an interim results meeting in Hong Kong. Mr. Hong Tianzhu, Chairman of the Board of Directors and Chief Executive Officer of the company, said that in the first half of 2017, despite the fierce competition in the market for traditional road products and easy-to-replicate differentiated products, the Group continued to focus on domestic elastic core-spun yarns and denim yarns through the Group strategically. Market, open up the market of differentiated high value-added yarn products, while making full use of the existing production layout advantages of the strategy to drive the income to maintain the desired growth.

Zhitong Finance APP learned that the interim results for the six months ended June 30, 2017, the company achieved a total turnover of 7.448 billion yuan (if not stated, the unit is the same), an increase of 27.9%; gross profit of 1.147 billion yuan, The year-on-year growth was 8%, the gross profit margin was 15.4%; the profit attributable to equity holders was 645 million yuan, up 41.2% year-on-year; the realized earnings per share was 0.7 yuan, up 34.6% year-on-year; the board of directors proposed to distribute 24 HK cents per share to shareholders. Interim dividend.

Zhitong Finance APP was informed that the company's interim results growth was mainly attributable to continued strong yarn sales and rising unit prices. During the period, the Group's yarn sales increased by 14.9% to over 300,000 tons, with revenue reaching 6.754 billion yuan, accounting for 90.7 of total revenue. In addition, the one-time gains from the acquisition of the denim apparel business during the period and the normalization of the operating subsidies of the Xinjiang plant also contributed to the company's performance growth.

Mr. Hong Tianzhu said that the denim garment business is a new business focused on the development of Tianhong Textile. The company will speed up the implementation of the industry chain platform and expect the denim business to become the medium and long-term growth engine of the group.

The following is a partial question and answer record of Zhitong Finance APP.

Q: What is the loss amount of the jeans business? If you want to achieve profitability in the next year, will you need to invest a lot of energy?

A: According to the previous announcements, the losses in the 15 and 16 years are several million US dollars. There are many factors that cause losses, including insufficient orders, and some problems in production efficiency. In the future, the problems will be transformed. Tianhong himself is doing clothing. One-third of the yarn we make is denim yarn. In fact, we have a synergistic effect to some extent when we acquired the business.

Our overall fabric-to-clothing segment is able to form a vertically integrated strategy that delivers a full range of services to customers, from quality, delivery and cost-effective services to end brands. We are sorting out our product structure and being able to combine with our advantageous supply chain; the reorganization of the entire assembly line is also underway; our labor productivity is being optimized; we have also done a lot of work on the back-end full-scale publicity, The back-end brand responded positively and generally developed in a good direction.

Q: Is there any other plan for the company to acquire in the future? In what direction will it be acquired?

A: Our turnover is still growing, yarn growth is stable. In the past 2 or 3 years, we have developed towards vertical integration and vertical integration. The difficulty of integration is not small. It takes a process to turn into profit. But the future of this strategy is worth looking forward to, and we also see that this model is also used by peers. In the 20 years since its development, Texhong has had the scale of today's horizontal expansion. Of course, we hope that the future will be stable. Regardless of the company's cash flow or capital expenditure, the downstream expansion may not be as large as the upstream, but the downstream expansion through mergers and acquisitions. It will be simpler than building itself, but it will not be so fast. If there is a new merger, it depends on the growth of the denim business or the development of endogenous business benefits. We also hope that in a relatively short period of time, perhaps in 18 years, we can see the fundamental growth of the denim business. At present, there are no new M&A projects to tell you.

Q: What is the current order status of Tianhong's jeans business acquired in Taiwan?

A: Basically, some of the big retail brands in the world have contact with us. These customers are the original denim business customers. Some of our customers also hope to complete the product development from the yarn, so we will arrange them for this acquisition. Approved, each customer's original customers have also maintained the original cooperative relationship with us. Our business will strengthen the scale of cooperation. In the chain of spinning and weaving to garments, we try to develop a vertical industrial chain. There are also some good synergies inside, and we hope to get the brand recognition.