Performance review
1Q22 performance is in line with our expectations
The company announced 1Q22 results: revenue 1.047 billion yuan, year-on-year + 7.8%; net profit 121 million yuan, year-on-year-50.7%; deduction of non-return net profit 117 million yuan,-51.9% year-on-year. The sharp decline in net profit compared with the same period last year was mainly due to changes in investment income, and the net profit of operating shareholders of listed companies increased by about 12% compared with the same period last year. The performance is in line with our expectations.
Trend of development
Income maintained steady growth. 1Q22's revenue grew 7.8% year-on-year, achieving steady growth despite outbreaks in many parts of the country in the first quarter. The company actively promotes the strategic transformation of "increasing cigarette label, expanding medicine bag, adding race, raising valuation". We expect 1Q22's tobacco label business to remain sound, new materials, new tobacco and other businesses to maintain a good growth momentum, promoting the continuous optimization of the company's business structure. In East China and other places, part of the company's production capacity was affected by epidemic prevention and control in the first quarter, and we expect the related business to recover quickly as the epidemic alleviates.
Changes in investment returns lead to a decline in profitability. 1Q22's gross profit margin was 32.2%, down 1.7ppt from the same period last year. We expect that on the one hand, the change in business structure is due to the change in business structure, on the other hand, the epidemic in East China has led to a reduction in capacity utilization in some factories. During the period of 1Q22, the expense rate decreased by 1.0ppt to 13.36% compared with the same period last year, in which the sales / management / finance / R & D expense rate changed respectively over the same period last year-0.6ppt/-0.4ppt/+0.1ppt/-0.2ppt, and the cost structure was further optimized. 1Q22's homing net interest rate fell 13.7ppt to 11.58% compared with the same period last year, mainly due to higher investment returns in the same period last year, and the company's consumer investment fund income fluctuated greatly this year; excluding the impact of investment returns from consumer investment funds, 1Q22 homed net interest rate increased 3.2ppt compared with the same period last year.
Optimistic about the company's medicine bags, new materials and other business development prospects. With the steady development of tobacco label business, the company actively expands diversified businesses such as medicine bags, new materials and new tobacco to promote strategic transformation. 1) Drug bags: according to the data of the prospective Industrial Research Institute, the scale of China's drug bag industry in 2020 is more than 100 billion yuan, but the industry concentration is relatively low. under the association evaluation system, the market share is expected to quickly concentrate to the head enterprises with high quality control, strong design and R & D capabilities, and the company's package business layout is perfect, providing a full-link solution for drug packaging, and we expect a broad space for development in the future. 2) New materials: the company has accumulated technology in the new materials industry for many years, and the company's functional membrane products have been applied in food packaging, new energy batteries, construction and many other fields, expanding Enjie shares, Ningde era and many other high-quality customers. we believe that the new materials business is expected to continue to contribute to growth in the future.
Profit forecast and valuation
The profit forecasts for 2022 and 2023 will remain basically unchanged. The current share price corresponds to a price-to-earnings ratio of 13 times 2023 / 11 times earnings for 2022 Universe. Maintain an outperform industry rating and a target price of 10.00 yuan, corresponding to 19 times 2022 earnings and 17 times 2023 earnings, which has 46% upside compared to the current stock price.
Risk.
Raw material prices fluctuate sharply; industry policy changes; new business expansion falls short of expectations.