Semi-annual report for 2021: 2021H1's income was 430 million yuan, an increase of 31.45% over the same period last year, and the net profit returned to its mother was 58.62 million yuan, an increase of 24.4% over the same period last year and 28.2% after deduction. Q2's single-quarter income was 205 million yuan, up 20.1% from the same period last year, while the net profit from its parent was 25.03 million yuan, down 23.7% from the same period last year

Medicine bag business, new business blossoms at many points: revenue in the first half of the year increased by 31.5%, of which Q2 revenue in a single quarter was 205 million yuan, an increase of 20.1% over the same period last year, slightly lower than that of Q1, but still maintained rapid growth, in line with our expectations. In terms of business, the drug bag business was 380 million yuan, an increase of 24% over the same period last year. The revenue of flexible packaging business in the first half of the year was 310 million yuan, an increase of 28.6% over the same period last year. Leading products such as cold aluminum benefited from the upgrading of high barrier products, and the market grew better; the income of hard packaging business was 110 million yuan, an increase of 24.6% over the same period last year; from a regional point of view, domestic business demand continued to grow by 400 million yuan, up 36% from the same period last year, while overseas business declined by 13.5%.

The company is a leading enterprise in the pharmaceutical bag industry, with profound customer resources, recognized by Huahai Pharmaceutical, Federal Pharmaceutical, Zhengda Tianqing, AstraZeneca PLC, Novartis AG and other domestic and foreign customers, and 80% of the top 100 enterprises in China's pharmaceutical industry. a total of more than 2000 pharmaceutical companies have cooperated. Benefiting from the policy of "volume procurement", downstream customer orders are gradually concentrated to the leading enterprises. in the past three and a half years, the company has issued more than 3000 authorized credits for customer consistency evaluation or new drug declaration, ensuring the steady development of the company's bag business. At the same time, in addition to medicine bags, the company has actively expanded other packaging business in recent years. In the first half of the year, the company's other business was 47 million yuan, an increase of 156% over the same period last year. Consumer goods such as cheese sticks are expected to gradually expand in the second half of the year and next year. At the same time, the company is also actively laying out aluminum-plastic film and other packaging applications to open up new growth space.

Raw material prices fluctuated, gross margin declined slightly, Q2 profit declined: due to the sharp rise in the price of raw materials such as aluminum foil, the company's gross profit was affected. The company's comprehensive gross profit margin in the first half of the year was 29.4%, down 4.2% from the same period last year. Considering the change in accounting caliber, the company's gross profit margin-sales expense rate fell 1.8% in the first half compared with the same period of 20H1. During the reporting period, the company's management / R & D / financial expense rates were-1.1%, 0.1% and-1.5%, respectively. Q2 single quarter: the company's gross profit margin is 27%,-9.9% year-on-year, and the gross profit margin-sales expense rate is down 6.6% from the same period last year. The company hedges part of the raw material cost impact by upgrading the product structure, and the Q2 single-quarter management / R & D / financial expense rate is-0.1%, 0.6% and-0.7%, respectively. Q2 net interest rate per quarter was 12.8%, down 7% from the same period last year, affecting the company's profits.

The new project is expected to be phased out: the company plans to issue no more than 46.96 million shares and no more than 30 per cent of its total share capital to no more than 35 specific investors. In this project, 5 recyclable high barrier composite production lines, 4 cold stamping high barrier composite hard sheet production lines and 20 multi-layer co-extruded high performance bottle-needle production lines are proposed. After completion, the company will further expand the production capacity of high barrier composite materials, establish product advantages and consolidate the company's core competitiveness. Looking to the future, the company will increase its production capacity by 18,000 tons per year after the project capacity has reached production capacity, an increase of nearly 70% over the total capacity at the end of 2020. In addition, according to the company announcement, the first phase of Nanxun project is expected to be put into production in 2021Q3, and the second phase of the project is expected to start construction in the middle of the year. The landing of new capacity is expected to effectively alleviate the pressure on the company's production capacity and lay the foundation for further revenue expansion.

Investment advice: the management of the company plans in advance to continuously promote the construction of new production capacity, and the profit level continues to improve. It is estimated that from 2021 to 2023, the EPS of the company will be 0.92, 1.27, 1.82 yuan respectively, maintaining the buy-An investment rating.

Risk hint: the increase of concentration is not as expected, and the volume of new products is not as expected.