The profitability of the hottest sun paper was imp

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Sun paper: profitability improved month on month, capacity expansion continued to advance

release date: Source: Southwest Securities Co., Ltd.

performance summary: the company released this year's semi annual report, achieving an operating revenue of 10.78 billion yuan in the first half of the year, an increase of 2.9% year on year. The net profit attributable to the parent company was RMB 890million, a year-on-year decrease of 27.8%; The net profit deducted from non parent company was 860million yuan, a year-on-year decrease of 28.7%; Among them, Q2 achieved a net profit attributable to the parent company of 510million in the single quarter, a year-on-year decrease of 17.8%, which was significantly narrower than Q1, and the profitability was restored

the decline of paper price affected the growth of revenue. The price of raw materials in Q2 decreased even more, and the profitability improved month on month. In 19h1, the average price per ton of double offset paper, coated paper and corrugated paper of the company was 6123.1, 5868.6 and 3661 respectively, with a year-on-year decrease of 16.6%, 22.6% and 17% respectively. The growth rate of the company's revenue was affected and fell back compared with the same period last year. Among them, the average price of the three kinds of paper in Q2 decreased by 17.4%, 21% and 26.3% respectively year-on-year, and the overall decline was larger than that in Q1. Therefore, the revenue of Q2 decreased by 6.53% year-on-year. In terms of raw materials, the average price of H1 tons of wood pulp and waste paper, the main raw materials, decreased by 14.9% and 15.5% respectively year-on-year. In the first half of the year, the overall paper price decreased more than that of raw materials. In addition, the average exchange rate of RMB in the first half of the year depreciated by 6.4% compared with the same period, resulting in a year-on-year decrease of 7.2pp in the overall gross profit margin of the company, which was 19.7%. However, in terms of quarters, the average price of q1/q2 wood pulp fell by 11% and 18.9% year-on-year respectively. The average price of raw materials in Q2 fell significantly more than that of paper products in a single quarter. Therefore, the profitability of the company improved in Q2, and the gross profit margin in Q2 increased by 4.1pp to 21.8% month on month. With the stable paper price in the second half of the year, and the paper price has dropped significantly in the same period last year, the base is low, and it is expected that the performance in the second half of the year will continue to improve

the cost increases steadily and the management is still of high quality. In the medium and long term, as the Laos "Forest Pulp paper integration" project enters the stable production stage, the company's control over raw materials will be enhanced, and the raw material cost advantage will be highlighted; At the same time, the integration of domestic paper industry will be strengthened, and the market share of leading enterprises with cost, environmental protection and capital advantages will also be increased. In terms of expenses, the four rates in the reporting period were 10.2%, up 0.9pp year-on-year, of which the sales expense rate was 3.5% (+0.5pp), the management and R & D expense rate was 3.9% (+0.9pp), and the financial expense rate was 2.8% (-0.5pp). In general, the changes in the three rates were in line with the enterprise's business strategy, and the cost control was reasonable. In the first half of the year, the net profit attributable to the parent company was% of the intelligent and data-based period of 8.5 blow molding machines (-4.9pp), of which Q2 reached 9.5%, which has been significantly improved

capacity expansion continued. The 100000 tons of sawdust pulp production line and 400000 tons of semi chemical pulp production line of the company have entered the stable production period, and the 200000 tons of natural color high yield biomass fiber project will also be put into operation in the fourth quarter of 19; At the same time, the 400000 ton recycled fiber pulp board production line in the 1.2 million ton papermaking project in Laos has been put into trial production in June, 19. In the subsequent projects, two high-grade packaging paper production lines with an annual output of 400000 tons are generally sold. It is expected that they will enter the trial production stage in the first half of 2021. In addition, the company plans to implement the "Forest Pulp paper integration project" in Beihai, Guangxi to integrate and supplement with the "Forest Pulp paper integration" project in Laos. The company will also invest RMB 2.02 billion to build a 450000 tons of characteristic cultural paper project in the headquarters. In the coming years, the company will have new production capacity put into operation, and the logic of volume increase will continue

the overseas layout is overweight, and the cost advantage continues to highlight. Affected by the foreign waste import policy, domestic waste may still be in shortage in the future, and enterprises that can have independent production capacity at the raw material end or flexible global procurement channels will benefit. With Laos as the fulcrum, the company takes the lead in opening overseas layout. In the future, the capacity expansion of packaging paper will also be overseas, which fully solves the industry pain points and national waste dilemma faced by current packaging paper enterprises. The foresight and first mover advantages of overseas layout are very prominent

profit forecast and investment suggestions. It is estimated that these bridges can be maintained for more than 75 years, with EPS of 0.8, 0.96 and 1.16 respectively, and corresponding PE of 9, 8 and 7 times respectively. As the leader of cultural paper, the company has outstanding R & D advantages, high market share, strong moat in management, and maintains the "buy" rating

risk tips: the risk of substantial fluctuations in raw material prices; The risk of large fluctuations in paper prices; The risk that the investment project is not put into operation as expected; Exchange rate fluctuation risk

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