If you look at the monthly K-line before July of the surplus (02111), then the live-off is the trend of a white horse stock. Since its listing in 2014, the share price of Chaoying International has gone up one step at a time, with the highest increase nearly three times, with almost no major correction during the period.
However, the steady rise of Chaoying International was ended this month. On July 16, Chaoying International suddenly dropped 14%, hitting its biggest one-day drop since its listing. On July 17, its share price fell again, with both the decline and the volume exceeding the previous day.
In just two days, the company's decline was close to 30%, and it also left a shocking broken knife-shaped yin line on its K-picture. The source of this big Yinxian comes from a performance forecast.
A "blood case" triggered by a performance forecast
Speaking of it, the surplus of Chaoying International on the 16th was somewhat confusing, and the company did not have any bad news. However, the company’s performance forecast released on the 17th gave the answer.
Zhitong Finance was informed that on July 17, Chaoying International (02111) released its first-half results forecast. The company expects net profit to decline in the first half of 2017, with a year-on-year decline of no more than 30%.
This makes investors stunned. We must know that Chaoying International was a good student in the Hong Kong stock market. Its performance has grown year after year, and the stock price has not disappointed investors.
In the eyes of the market, good students are constantly improving, and Super Ying International’s “interim exam†results have encountered Waterloo. This is not a problem that the performance is not in line with expectations, and it is contrary to market expectations.
The exam was tested, and the share price of Supermarket International on the 17th was also reasonable. However, the company only announced on the 17th, why the stock price fell sharply one day ahead of time, is it not the prophet? Zhitong Finance speculated that the news of its decline in performance did not rule out the possibility of early leakage. If the relevant investors "accurately flee", it is not surprising that the stock price has dipped.
Big A shares have such cases in the near future. On July 11, Beinmei 002570, the stock (002570.SZ) collapsed after midday, the volume dropped, and the company has been suspended since then. On July 14, the company revised its previously announced performance forecast and changed its profit to a loss of 400 million. Before the performance changed, some investors fled in advance, and there was a clear suspicion of insider trading. The letter of concern from the Shenzhen Stock Exchange has asked Beinmei to submit a list of inside information insiders for this performance correction.
Although the A-shares are a lot of chaos, the supervision is still "in every possible way." Chaoying International now also has a flashback before the performance forecast, but it can't expect the Hong Kong stock regulator to intervene in the investigation.
Has the performance turning point been reached?
Then, for the first time, the performance of Chaoying International has declined. It is a signal of reversal of performance, or a short stay on the way to growth. It is necessary to take a detailed look at the fundamentals of the company.
According to Zhitong Finance, Chaoying International was established in 2003 as a supplier of women's underwear materials. In 2013, it began to expand its business into sportswear materials. The company's main production base is located in Dongguan City.
As the world's largest supplier of women's underwear materials, Chaoying International has established long-term and stable strategic partnerships with many first-tier brands around the world. In the underwear sector, it includes high-end brands such as Wei Mi, Wacoal, Triumph, Marks & Spencer, CK and Manifin. Among them, Wei Mi is the company's largest customer, accounting for 15% of revenue. In terms of sportswear, its customers include UA An Dema, Lululemon, Adidas and so on.
Benefiting from consumption upgrades and a large consumer base (500 million people), the Chinese underwear market is still in a period of rapid growth, with the growth rate in the apparel industry ranking first, and the size of the underwear materials market growing simultaneously. At the same time, the sportswear market has maintained an average annual growth rate of 10%+.
The industry has grown rapidly, the company's own customer base is stable, and its overall international performance is also growing rapidly. In the past three years, the company's revenue has increased by 50%, and its net profit has more than doubled. Its gross profit margin reached 33.5% and its net profit margin reached 18.5%, both of which are in the leading position in the industry.
At the same time, the cash flow of Chaoying International is also very stable, and the net cash inflow from operating activities per year is basically higher than the net profit level. The company's performance has continued to grow, with strong cash flow. The company is also not paying dividends. The annual dividend payout ratio is above 35%.
If the Hong Kong stock market is a large class, it is not an exaggeration to position Supermarket International as a good student. Good students are always aggressive. As the two businesses continue to expand and orders increase, the company actively expands production capacity to raise income levels. The company will build the sixth phase of Dongguan production base and overseas Vietnam production base, and its production capacity will expand by more than 30%. Among them, the Vietnamese production base has been launched.
Revenue growth - capacity expansion - further growth in income, this is a virtuous circle of dreams for production companies. However, if the production capacity goes up and the income has not kept up, it will be a little embarrassing. This is the case with Chaoying International.
In the performance forecast, Chaoying International stated that the decrease in net profit was mainly attributable to the lower than expected revenue and the impact of continuous investment in property, plant and equipment, and overall production expenses.
Chaoying International said that the underwear material segment revenue was lower than expected, while the performance of the sportswear fabric segment was expected.
In 2016, the company's revenue increased by more than 20%, and the company's growth in 2017 is expected to increase. In the first half of this year, the growth of underwear fabrics was less than expected, but the probability of growth was recorded.
Since the end of 2016, the company's largest customer, Wei Mi, has entered the domestic market, and the company will benefit in parallel, or will promote its second-half revenue growth. In 2016, the company's sportswear fabric segment revenue increased by 51%, and revenue accounted for nearly 20%. In 2017, the business segment may continue to maintain high growth, which is expected to become the biggest driving force for the company's revenue growth.
In terms of expenditure, with the full use of the company's new production facilities, scale effects will begin to appear, and related production expenditures will be significantly reduced, which will also significantly reduce the erosion of net profit levels.
A good student is a good student after all. If you don’t take a test, you can’t judge it as a bad student. Zhitong Finance believes that the net profit of Chaoying International has declined or is temporarily. With the further growth of sportswear fabrics and the full operation of new production facilities, the company will return to the growth track. However, the company's previous high growth expectations are no longer there, and its performance growth remains to be seen.
Avoiding or bargaining?
A paper performance forecast, so that the surplus share price fell nearly 30% in two days, so the short-term is the bargain-hunting or evasive?
From the valuation point of view, after the plunge, the surplus P/E ratio of Chaoying International is about 11 times, which is at a medium level in the industry. In other words, if you lose high growth expectations, the price of Chaoying International is not cheap.
From a technical point of view, after such a broken line like a broken knife, it is unwise to steal the bottom. A sudden increase in the set of orders will make the stock price oversold and rebound, and the stop-loss disk will help the stock price decline. At the same time, Chaoying International has risen for three consecutive years, and it is reasonable to see a large adjustment.
Therefore, on the whole, for the company, it is recommended that investors temporarily evade and observe the follow-up performance. If the company's performance returns to the growth channel, then the safety margin of re-intervention will be higher.
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