Investment Rating - The report maintains a "Buy" rating for Tianhong International Group (02678 HK) with a target price range of 4 70-5 00 HKD [1][3] Core Views - Tianhong International Group experienced a 5% decline in revenue in 2023 due to overseas brand destocking, resulting in a net loss of 380 million RMB [1] - The company's gross margin recovered to 10% in H2 2023, driven by improved order demand and higher capacity utilization in Vietnam [1] - The company's yarn business remained stable with a slight revenue decline of 0 3%, while woven fabric and knitted fabric revenues dropped by 22 3% and 8 0% respectively [1] - The company's financial expenses increased due to higher debt levels from previous capital expenditures and overseas interest rate hikes [1] - Operating cash flow improved by 23% to 1 99 billion RMB in 2023, supported by better inventory management [1] Financial Performance - Revenue for 2023 decreased by 4 5% to 22 725 billion RMB, with a net loss of 376 million RMB compared to a profit of 157 million RMB in 2022 [1][2] - In H2 2023, revenue grew by 11% YoY, with yarn revenue increasing by 13 2% and gross margin recovering to 10 0% [1] - The company's net profit in H2 2023 was 370 million RMB, supported by the sale of its Vietnam knitted fabric business and domestic factory relocation [1] - The company's 2024-2026 net profit forecasts are 590 million, 760 million, and 920 million RMB, with growth rates of 29% and 22% in 2025 and 2026 respectively [1][9] Operational Highlights - The company plans to sell 760,000 tons of yarn, 92 million meters of woven fabric, and 120 million meters of knitted fabric in 2024 [1] - Capital expenditure in 2023 was 900 million RMB, significantly lower than previous years, and the company plans to continue controlling capital spending in 2024 [1] - The company aims to reduce foreign currency debt to alleviate interest expense pressure [1] Industry Outlook - The report highlights a recovery in demand, with overseas brand destocking nearing its end and cotton prices rising, which is expected to support order volume and pricing in 2024 [1][9] - The company's early globalization strategy and local supply chain advantages position it well to capture market share in the long term [1][9] Financial Metrics - The company's ROE is expected to improve from -4 1% in 2023 to 6 1%, 7 5%, and 8 6% in 2024-2026 [2][10] - The PE ratio is forecasted to decline from 22 6 in 2022 to 6 0, 4 7, and 3 8 in 2024-2026 [2][10] - The EV/EBITDA ratio is projected to decrease from 33 5 in 2023 to 8 3, 7 3, and 6 5 in 2024-2026 [2][10]
订单需求回升，2023下半年毛利率修复至10%