Huafu(SZ:002042) Guotai Junan Securities·2024-05-06 02:33Investment Rating - The investment rating for Huafu Fashion (002042) is "Buy" with a target price of 5.52 CNY, up from a previous forecast of 4.05 CNY [2][24]. Core Views - The report indicates that due to weak downstream demand, the company's profitability is under pressure in 2023, and the performance pressure is expected to continue into Q1 2024. The company is actively managing costs while awaiting recovery in downstream demand [24]. - The company reported a revenue of 13.663 billion CNY in 2023, a decrease of 5.5% year-on-year, with a net profit attributable to shareholders of 0.7 million CNY [24]. - The report highlights that the company is adjusting its EPS forecasts for 2024-2025 to 0.06 CNY and 0.13 CNY respectively, with a new EPS forecast for 2026 set at 0.18 CNY [24]. Financial Summary - The company's total revenue for 2023 was 13,663 million CNY, down from 14,460 million CNY in 2022, reflecting a year-on-year decline of 5.5% [4][10]. - The gross profit margin decreased by 1.0 percentage points year-on-year, with domestic sales revenue declining by 6.2% and international sales increasing by 3.0% [24]. - For Q1 2024, the company expects revenue to decline by 13.4% year-on-year, primarily due to a reduction in the scale of its network chain business [24]. Business Performance - The revenue breakdown shows that yarn, network chain, and sock products generated revenues of 58.4 million CNY, 74.0 million CNY, and 3.8 million CNY respectively, with year-on-year changes of -2.2%, -7.9%, and +8.0% [24]. - The report notes that the company is effectively controlling costs, with sales expense ratios remaining stable and slight improvements in management, R&D, and financial expense ratios [24]. Market Position - The company is recognized as one of the largest manufacturers and suppliers of high-end colored yarn globally, focusing on environmentally friendly technology [24]. - The report emphasizes that the company is well-positioned to benefit from a potential recovery in downstream demand, which could lead to improved order volumes and performance [24].