This report is read as follows:

The profits of the company's main paper types remain robust, and the performance is slightly under pressure due to weaker demand in the second half of the year, and the cost rate level is optimized; the high pulp self-sufficiency rate effectively reduces the risk of pulp price fluctuation, and the leading advantage of scale effect capacity expansion is significant.

Main points of investment:

Lower the target price to 7.68 yuan to maintain the overweight rating. Considering that the international paste price has risen sharply since the beginning of the year under the influence of geopolitics, overseas strikes and shipping obstruction, it is expected to have a certain impact on the company's performance. The EPS will be lowered to 0.70 (- 0.77) / 0.75 (- 0.86) / 0.86 yuan in 2022, with reference to the industry giving the company 11 times PE in 2022, and the target price will be lowered to 7.68 yuan to maintain the overweight rating. The performance is basically in line with expectations, and Q4 is slightly under pressure due to weaker demand. In 2021, the company completed mechanism paper sales of 5.45 million tons (- 2.85%), revenue of 33.02 billion yuan (+ 7.43%), net profit of 2.066 billion yuan (+ 20.65%), year-on-year increase of 0.54pct to 23.61%, and net profit margin of 0.13pct to 6.33%. Affected by the fluctuation of paper prices, the rise in pulp prices and the weakening of terminal demand, Q4's single-quarter revenue and net profit fell by 16.22% and 118.38% respectively compared with the same period last year, the profits of major paper types remained robust, the cost rate was optimized, the prices of commodities such as coal and chemicals rose sharply, and the use of shipping goods increased significantly, but the company adopted various measures to absorb the adverse effects of external fluctuations. The gross profit margin of machine-made paper increased to 23.50% from the same period last year, of which the gross profit margin of white cardboard paper and coated paper increased by 4.68pct and 6.07pct respectively. Sales, management and financial expense rates decreased 0.08pct.0.48pct and 1.11pct compared with the same period last year, the scale of financial leasing business continued to shrink, the financial structure was significantly optimized, high pulp self-sufficiency rate effectively reduced the risk of pulp price fluctuation, and the leading advantage of scale effect capacity expansion was significant. The company has a self-made wood pulp production capacity of 4.3 million tons, the price of self-made pulp wood chips is relatively stable, bulk material procurement advantages and supporting logistics services can greatly reduce the transportation cost of raw materials and finished products. Since the beginning of 2022, the international pulp price has risen sharply under the influence of multiple factors, the price increase of finished paper in the circle has occurred frequently, the self-sufficiency rate of wood pulp of the company is high, and the profit level is expected to improve month-on-month under the expectation of the overall rise of paper price.

Risk hints: macroeconomic fluctuation risk, raw material price fluctuation risk, financial lease financial risk