Zhejiang Xinao Textiles (SH:603889)2024-06-04 11:00Investment Rating - The report maintains an "Outperform" rating for the company, with a target price of 9.81 RMB based on a 15x 2024 PER [41][50]. Core Insights - Wool prices have stabilized in Q1 2024, showing a 3.2% increase from Q4 2023, although down 17% year-on-year, indicating potential recovery in raw material prices which could positively impact the company's earnings [1]. - The company is diversifying its product offerings and implementing a "broadband strategy" to enhance market competitiveness, focusing on high-value textile applications and expanding its global presence [2][3]. - The company has established international sales and production bases, including plans for a new production facility in Vietnam, aimed at improving supply chain efficiency and capturing overseas market share [3]. Summary by Sections Wool Price Trends - Wool prices peaked in early February 2023 and fell 27% by early November, but have since shown signs of recovery, with an average price of 768.5 US cents/kg in Q1 2024 [1]. Business Strategy - The company is expanding its yarn product range and exploring high-value applications in various sectors, including home textiles and industrial uses, while also developing functional yarns for outdoor sports [2]. - The integration of resources from New Australian Cashmere and British Duncan aims to enhance the company's global influence and market share in cashmere yarn [2]. Global Expansion - The company has a strong international presence with offices in multiple countries and is enhancing its competitiveness through global operations [3]. - The establishment of a production base in Vietnam is part of the strategy to improve supply chain delivery and increase market share [3]. Financial Projections - The company expects net earnings to reach 478 million RMB, 574 million RMB, and 658 million RMB for 2024, 2025, and 2026 respectively, with projected revenue growth of 14.4%, 13.5%, and 15.3% during the same period [41][50].