1H21 performance is lower than we expected.

The company announced 1H21 results: revenue 1.644 billion yuan, year-on-year + 22.1%; return to the mother net profit 50 million yuan, year-on-year-47.1%; deduction of non-return net profit 44 million yuan, year-on-year-47.7%. Of this total, the 2Q21 income was 824 million yuan, + 2.4% compared with the same period last year, the net profit of returning to the mother was 10 million yuan,-78.80% compared with the same period last year, and the net profit was 6 million yuan,-85.3% from the same period last year. Due to the increase in the price of raw materials and the expansion of company expenses, the performance was lower than we expected.

Development trend

1. Revenue has achieved good growth under the low base. The company's 1H21 revenue also increased by 22.1%. We believe that on the one hand, due to the low base caused by last year's epidemic, downstream customers have achieved restorative growth this year, and on the other hand, the company has continued to deepen the depth and breadth of customer service. Of this total, the sales revenue of light packaging products was 1.084 billion yuan, an increase of 23.2% over the same period last year, and that of third-party procurement was 469 million yuan, an increase of 28.50% over the same period last year. But revenue from heavy packaging products fell 19.7% to 43 million yuan. 2. The rising price of raw materials and the expansion of expenses affect the profitability of the company. The company's 1H21 gross profit margin was 22.76%, down 5.2ppt from the same period last year, and the gross sales margin decreased by 2.95ppt to 16.27% compared with the same period last year, of which 2Q21 gross profit margin decreased by 6.0ppt to 21.87% year-on-year, on the one hand, due to the impact of the adjustment of hand accounting standards, on the other hand, due to the sharp rise in the price of upstream packaging paper in the first half of the year and the increase in depreciation At a comparable caliber, the gross profit margin of the company's paper products business fell by 1.98ppt to 20.92% compared with the same period last year. In terms of the period expense rate, the 1H21 sales expense rate decreased by 2.3ppt to 6.49% compared with the same period last year, which was mainly affected by the adjustment of accounting standards; the management / finance / R & D expense rate changed from + 0.3ppt/+0.4ppt/-0.2ppt to 7.79%, 0.56% and 3.80%, respectively. Affected by the decline in gross profit margin and the expansion of the rate of expenses during the period, the net return rate of 1H21 decreased 4.0ppt over the same period last year. To 3.1%.

3. Pay attention to the production capacity and customer development of the company in the future. 1) in terms of production capacity, the decline in 1H21's profit margin is partly due to the gradual commissioning of the company's production bases in Foshan and Vietnam during the reporting period, resulting in low initial capacity utilization, resulting in higher costs such as depreciation and labor. At present, the production capacity of the company's new bases, such as Tongnai, Lianshui, Liu'an, Changsha and Chengdu, has also been gradually released. 2) in terms of customers, the company will continue to expand customers in consumer electronics, food and beverage, household appliances, automobiles and other fields, relying on the advantages of production capacity, research and development, and talents, and continue to strengthen the depth and breadth of cooperation. It is recommended to continue to pay attention to the company's new customer development and order acquisition progress.

Profit forecast and valuation

Based on the rise in raw material prices and the higher-than-expected expansion of company expenses, they were lowered respectively: 2021 / 2022 EPS28%/9% to 0.18 yuan / 0.24 yuan. The current share price corresponds to a price-to-earnings ratio of 19x / 14x in 2021 / 2022. Maintain an industry rating that outperforms. Based on the adjustment of earnings forecast, the target price will be lowered by 10% to 4.05 yuan, corresponding to 23 times / 17 times earnings in 2021 / 2022, which has 19% upward space compared with the current stock price.

Risk

Raw material prices fluctuated sharply, and the commissioning of new capacity fell short of expectations.