Items:

The company announced its performance in 2021, KuaiBao, with an estimated operating income of 5.084 billion yuan in 2021, + 21.32% year-on-year; net profit of 1.006 billion yuan, + 22.12%; and non-return net profit of 808 million yuan, + 3.71% over the same period last year.

Comments:

Traditional business remains stable, while new business performs brightly. In 2021, the sales revenue of the company's tobacco label products was-4.07% compared with the same period last year, mainly because the company's business in some regional markets was in a recovery period; in terms of color box products, the company grasped the market trend of upgrading middle and high-end tobacco and alcohol packaging and 3C product packaging, strengthened product research and development and market development, while actively expanding the leading customers of Yanghe, Fenjiu, Xijiu and Yunnan Baiyao, realizing color box product sales revenue of + 23.52% compared with the same period last year. The continuous investment effect of the new tobacco plate is remarkable, and breakthroughs have been made in the extension of the industrial chain, customer expansion, capacity construction and other aspects. The sales revenue of the new tobacco plate is + 381.16% compared with the same period last year, and the performance growth rate is eye-catching.

Affected by the structural fluctuation of performance and the benefit of investment, the growth rate of revenue is higher than that of deduction. The YoY+3.71%, growth rate of the company's non-parent net profit in 2021 is lower than that of revenue, mainly as follows: 1) the non-recurrent gains and losses generated for the whole year include the holding of shares in Huada Beidou into transactional financial assets, resulting in a variable income of about 90 million, as well as the acquisition of 70 per cent of Qingdao Yingnuo, the remaining 30 per cent equity production of about 50 million of investment income, as well as some government subsidies and disposal of asset production gains. 2) with the adjustment of revenue structure, the growth rate of e-cigarette supply chain business is fast, but at the initial stage of layout, the gross profit margin is low (14% +), which lowers the growth rate of the profit end. In the future, with the scale effect and the promotion of the company's cost reduction and efficiency, gross profit margin is expected to increase.

The whole industry chain layout of new tobacco, performance can be expected. 1) HNB: Changyi Technology, a subsidiary, has occupied a certain market share in the field of HNB flavors and fragrances and related new materials, and has established good cooperative relations with Sichuan Zhongyan, Yunnan Zhongyan and so on. 2) atomized e-cigarettes: its own brand FOOGO continues to make efforts in the field of atomized e-cigarettes (disposable cartridges), and its domestic market share is at the forefront; Jinjia Technology continues to open up the market to provide ODM/OEM services to customers, mainly including small cigarettes, including Longwu and you and my group. 3) Integrated supply chain: subsidiary Indonesia Yunpu Xinghe promotes new integrated tobacco supply chain integrated services in Indonesia; Hengtian Commerce carries out international trade and agency; Jiaju Electronics has strong overseas brand operation ability. Yunshuo Technology is engaged in the R & D, production and sales of traditional tobacco flavors and spices and atomized e-cigarette oil, with customers covering a number of China Tobacco companies and e-cigarette brands such as FOOGO and Suorin.

The main business of tobacco label has risen steadily, and the business of color boxes, new materials and new tobacco has grown well, and the "strong push" rating has been maintained. In terms of tobacco label, the company actively participated in bidding and gradually eliminated the previous unfavorable factors. In terms of new business, the color box business of the company maintained high growth, the new material business gradually expanded, and the new tobacco business had great potential. We raise the company's profit forecast and expect the company's 2021-2023 net return profit to be 10.06 + 12.38 + 15.32 (the previous value: 9.72 + 11.65 + 13.35), respectively, and the corresponding share price PE is as much as that of 25-20-16. Taking into account the company's leading position in the tobacco label industry and the rapid growth of diversified business, according to the DCF valuation model, the company raised its target price to 20.6 yuan per share, corresponding to 25 times PE,2023 in 2022 and 20 times PE in 2022, maintaining a "strong push" rating.

Risk tips: orders fluctuate, new tobacco penetration increases less than expected, and policy risks.