Key takeaway

In 2025, the company recorded operating revenue of RMB7.861bn (-1.0% YoY) and net profit attributable to shareholders of the parent company of RMB656mn (+60.0% YoY). In 4Q25, operating revenue was RMB2.136bn (+14.4% YoY), and net profit attributable to shareholders of the parent company was RMB106mn, turning from a loss to a profit. In 1Q26, operating revenue was RMB1.988bn (+14.8% YoY), and net profit attributable to shareholders of the parent company was RMB243mn (+39.8% YoY). Breaking down volume and price, yarn sales volume reached 261,000 tons in 2025 (+7.6% YoY), with an average selling price of RMB28,500 per ton (-5.8% YoY). In 1Q26, volume is estimated to have increased by approximately 20%, while selling price declined by 6%. In 2025, the company's gross margin was 13.67% (+3.47pct YoY) and net margin was 8.35% (+3.18pct YoY). In 1Q26, gross margin was 17.07% (+2.21pct YoY) and net margin was 12.20% (+2.18pct YoY). Low cotton prices and high capacity utilization rates drove the year-overyear improvement in gross margin. On cotton prices, as of April 28, 2026, the Cotlook A Index averaged 89.55 US cents per pound, up approximately 23% from its low in February. The company has stepped up raw material procurement and locked in positions through futures. Its low-cost raw material inventory is estimated to cover approximately one year of demand. Looking ahead to 2026, amid the upward trend in cotton prices, the company's order book is full, and selling prices are gradually being raised. The low-cost raw material inventory is expected to unlock significant profit elasticity.

Event

The company released its 1Q26 earnings results. In 1Q26, the company achieved operating revenue of RMB1.988bn/+14.8% YoY, net profit attributable to shareholders of the parent company of RMB243mn/+39.8% YoY, and net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses of RMB215mn/+46.3% YoY.

The company released its 2025 annual report. In 2025, the company recorded operating revenue of RMB7.861bn (-1.0% YoY), net profit attributable to shareholders of the parent company of RMB656mn (+60.0% YoY), net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses of RMB612mn (+179.0% YoY), net cash flow from operating activities of RMB1.088bn (-21.3% YoY), basic EPS of RMB0.44 (+63.0% YoY), and weighted ROE of 6.99% (+2.74pct YoY). The company plans to distribute a final dividend of RMB2.5 per 10 shares (tax inclusive). Combined with the interim dividend, total cash dividends for the full year amount to RMB600mn, representing a payout ratio of 91.4%.

On a quarterly basis, in 4Q25 the company achieved operating revenue of RMB2.136bn (+14.4% YoY), net profit attributable to shareholders of the parent company of RMB106mn, turning from a loss to a profit, and net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses of RMB104mn, also turning from a loss to a profit.

Quick Take

In 1H25, tariff disruptions led to cautious ordering by customers. Orders recovered rapidly in 2H25, and growth in 1Q26 continued to be primarily driven by sales volume. In 2025, the company's main business yarn revenue reached RMB7.43bn, up 1.4%. Breaking this down by volume and price, the company's sales volume was 261,000 tons, up 7.6%, while the average selling price was RMB28,500 per ton, a YoY decrease of 5.8%. In 1H25, disruptions from the US "reciprocal tariff" policy led downstream customers to become more cautious in placing orders, with a growing wait-and-see sentiment. Sales volume declined in the first half of the year. In the second half, orders recovered rapidly, and capacity utilization remained high (Vietnam base was essentially at full production). Breaking down 1Q26 by volume and price, sales volume is expected to grow by 20%, while the average selling price is expected to decline by 6% YoY. By product, in 2025, color-spun yarn revenue was RMB3.96bn, down 2.5%, with a gross margin of 17.8%, up 6.6 pcts, and a revenue share of 50.3%, down 0.8 pcts. The shipment volume share of color-spun yarn is estimated to be below 50%, with shipment volume declining YoY. Grey yarn revenue was RMB3.47bn, up 6.2%, with a gross margin of 8.1%, up 1.5 pcts, and a revenue share of 44.2%, up 3.0 pcts. Its shipment volume share is estimated to be above 50%, and the company's sales volume growth was driven by grey yarn.

Low raw material costs and full order books led to a continuous improvement in gross margin. In 2025, the company's gross margin was 13.67%, up 3.47 pcts, net margin was 8.35%, up 3.18 pcts, and the income tax rate was 11.51%, down 1.62 pcts. In 1Q26, the company's gross margin was 17.07%, up 2.21 pcts YoY and up 2.61 pcts QoQ. Net margin was 12.20%, up 2.18 pcts YoY and up 7.22 pcts QoQ. The income tax rate was 10.71%, down 1.69 pcts YoY and down 6.47 pcts QoQ. The company maintained relatively high capacity utilization at its factories in China and Vietnam. On the cost side, the company uses the average cost method, and coupled with low cotton raw material prices, the main business's profitability continued to improve. On the expense side, in 2025, the company's selling, administrative, R&D, and financing expense ratios were 0.39%, down 0.07 pct; 3.5 2%, down 0.18 pct; 0.96%, down 0.45 pct (optimizing R&D resource allocation by focusing on core technologies and reducing investment in non-key projects); and 0.78%, down 0.69 pct (the scale of bank borrowings decreased significantly YoY). On a quarterly basis, in 1Q26, the selling, administrative, R&D, and financing expense ratios were 1.03%, up 0.25 pct; 3.45%, down 0.63 pct; 1.13%, down 0.10 pct; and 0.47%, down 0.94 pct (benefiting from the depreciation of the Vietnamese Dong).

The company continues to deepen its dual-base production capacity build-up in China and Vietnam. The company's Vietnam base leverages its location advantages and trade facilitation conditions to secure highquality overseas orders and mitigate trade barrier risks. The domestic base focuses on high-end color-spun yarn and differentiated products to enhance product value. Currently, the company's cotton yarn production capacity is 1.66 million spindles (1.3 million in Vietnam and 360,000 in China), with 78% of its capacity located in Vietnam. In 2025, the subsidiary BROS Vietnam achieved operating revenue of RMB6.211bn / +3.6%, net profit of RMB642mn / +27.4%, with a net margin of 10.3% / +1.9pcts. Domestic revenue is estimated at RMB1.65bn / - 15.2%, with net profit of RMB14mn / turning from loss to profit, and a net margin of 0.9%. In 2025, the company's investment income was RMB157mn, of which income from long-term equity investments accounted for using the equity method was RMB135mn, mainly contributed by the investment in Ningbo Commerce Bank (in 2025, Ningbo Commerce Bank achieved net profit of RMB1.513bn, and Shanghai XinYu achieved net profit of - RMB7.1341mn).

Looking ahead to 2026, rising cotton prices and full order books should allow the company's low-cost inventory to unlock profit elasticity. Regarding cotton prices, as of April 28, 2026, the average price of the Cotlook A Index for foreign cotton was 89.55 US cents/lb, up 23.0% from the low of 72.80 US cents/lb on February 6, 2026. As of April 29, 2026, the domestic cotton price was RMB17,806/ton, up 21.4% from the low of RMB14,664/ton on October 16, 2025. The company has stepped up raw material procurement, with inventory at RMB3.989bn at end-2025 and RMB3.823bn at end-1Q26. Combined with hedged positions via futures (the company held trading financial assets of RMB28.57mn at end-1Q26, with US cotton futures contract leverage of approximately 10-16x), the company's low-cost raw material inventory is estimated to have already exceeded the normal inventory level (6-8 months) and may cover one year of demand. Amid the upward trend in cotton prices, the company's order books are full. It is expected to gradually implement price pass-through after 2Q26, while benefiting from low-cost raw material inventory, which is likely to unlock significant profit upside.

Earnings forecast: We estimate the company's 2026-2028 revenue at RMB8.94bn, RMB9.81bn, and RMB10.57bn, representing YoY growth of 13.7%, 9.8%, and 7.8%; net profit attributable to shareholders of the parent company at RMB1.00bn, RMB1.09bn, and RMB1.17bn, representing YoY growth of 52.1%, 9.6%, and 6.9%, corresponding to P/E multiples of 13.2x, 12.0x, and 11.3x. The company's current PB (LF) is 1.41x. We maintain our "Outperform" rating.

Risks:

1) Demand fluctuation risk: The textile industry is closely linked to the macroeconomic environment and relevant national policies. The downstream textile and apparel market demand in the company's industry is affected by multiple factors, including the national macroeconomy and domestic textile import and export policies. Meanwhile, factors such as overseas inflationary pressure, inventory destocking by European and US clients may also bring uncertainty to the company's manufacturing business.

2) Raw material price fluctuation risk: The company's production costs mainly include cotton, energy, and labor, among which cotton cost accounts for approximately 70% of production costs. If cotton prices experience significant fluctuations due to changes in global climate conditions, shifts in national policies, and commodity price volatility, it will pose challenges to the company's raw material cost management.