Mutual Textile: The Epidemic Affected Factory Shutdown For About Three Weeks, And China And Hongkong Accounted For Over 30% Of Revenue.

In February 12, 2020, 01382-HK announced that, due to the impact of the new coronavirus pneumonia, the company's production in Panyu, Guangdong, has been shut down for about three weeks and has been resumed in February 12, 2020. However, some production units which are still unable to return to Guangdong by the workers in the heavily polluted provinces and cities will have a decline in the production capacity of the Panyu plants, which will delay the delivery of products in February 2020 and March.

The production of this exchange textile factory is about three weeks. During the normal spring festival, textile enterprises also stop production for a week or so. It is expected that the cut-off time will be reduced for about 2 weeks, which will have a great impact on the company's output.

China and Hongkong account for over 30% of revenue.

Mutual textile is a knitted fabric manufacturer and marketer. The downstream industry is the clothing industry. Originally, the Spring Festival is the peak season for clothing sales under the annual line, which is the best period for textile and garment enterprises to increase their income and profits. Unexpectedly, in 2020, when the Spring Festival met with the new coronavirus pneumonia, China's major garment enterprises closed the door and delayed working hours, during the epidemic, consumers stroll. No shopping malls, even if the stores open, it also reduces many consumers.

Although online sales have not been affected or even increased, most of the logistics companies have also stopped, and the sales volume will not increase as a result of logistics drag, which is mainly affected by the sales volume of physical stores. The sales volume of garment enterprises will be greatly affected in the first quarter of 2020.

It is worth noting that in the 6 months ended September 30, 2019, the total revenue of customers from China and Hongkong was about 912 million yuan (HK $, the same below), accounting for about 30.16% of the total revenue of the company, accounting for more than 30%. It can be seen that the business of Chinese and Hongkong customers has a greater impact on the exchange of textiles. After all, this epidemic has a great impact on the garment industry in China and Hongkong. Travel enterprises, orders will also have a great impact. And the delayed work of mutual textiles during the Spring Festival will result in the delayed delivery of the original orders. If the latter may be gradually compensated for by overtime work, it will increase the labor costs of the company and other costs brought by the epidemic.

There has been a downward trend in performance, and share prices have been hitting new lows in recent years.

From 2016 to the present, the performance of mutual textiles has declined, and its revenue decreased by 11.68% yuan from 6 billion 928 million yuan in 2016 to 6 billion 119 million yuan in 2019. Net profit from the parent company decreased by 23.45% yuan from 2016's 1 billion 126 million yuan to 862 million yuan in 2019. With the decline in net income in recent years, the company's share price has dropped by about 50.62% from January 4, 2016 to February 13, 2020.

In the 6 months ended September 30, 2019, the company's revenue was about 3 billion 25 million yuan, down 11.09% from the same period last year, and its net profit to the parent company was 412 million yuan, down 17.86% from the same period last year. From the mid term report of /2020 in 2019, the income of mutual textiles in China, Southeast Asia, Hongkong, Sri Lanka, Bangladesh and other regions all declined.

Since the release of the /2020 interim report in 2019, the company's share price has fallen by 13.09% between December 4, 2019 and February 13, 2020. After the outbreak, the company's share price fell by 7.90% between January 29, 2020 and February 12th.

It is worth noting that as of September 30, 2019, the cash and cash equivalents of the company ended up to 943 million yuan, representing an increase of 233 million yuan over the same period in 2018. Although the cash has increased, the company's lending rate is 502 million yuan, an increase of 242 million yuan over the same period in 2018. It is clear that the increase in cash and cash equivalents is due to the increase in borrowing, but up to September 30, 2019, the total amount of the company's total assets. The debt to equity ratio is only 36.26%, lower than the average level of the same industry. The current cash flow is relatively adequate to cope with the impact of short-term financial pressure caused by the epidemic.

Conclusion: the impact of the epidemic on the output of the textile products not only is the production stoppage of factories, but also affects the sales volume of the upstream garment manufacturers of the textile industry. The revenue of the company's customers in China and Hongkong accounts for 30% of the total revenue, which is bound to have a great impact. It can be predicted that the order volume of the company in the first quarter of 2020 will be greatly reduced. Moreover, the company has a downward trend in its revenue and profits since 2016, which will superimpose the impact of this epidemic. The company's mid term performance in 2019 /2020 will continue to bear pressure.