Investment highlight
Covering Zijiang Enterprise (600210) for the first time, the target price is 8.24yuan. Based on the segment valuation method, it corresponds to 25 times of the new material business in 2023 and 14 times of the other business in 2023. The reasons are as follows:
The company is mainly engaged in packaging business and has successfully applied aluminum-plastic film to the field of lithium battery in recent years. The company is mainly engaged in PET bottle and bottle preform, color paper packaging printing, labeling and other business, and has become a leading enterprise in the domestic packaging field. In addition to the packaging business, the company began to layout aluminum-plastic film business as early as 2004, and successfully applied it to the field of lithium batteries in recent years.
The packaging industry has a wide space, and Zijiang continues to open up new business and customers by virtue of its scale and manufacturing advantages. 1) Industry: the scale of China's packaging industry is about trillion yuan, and the development of downstream express delivery and soft drinks industries promotes the steady growth of demand. However, the concentration of China's packaging industry is low, environmental protection policies and demand upgrading promote the market share of head enterprises. 2) Zijiang: the company's packaging income is 6.36 billion yuan in 2021, leading in the scale industry, and the scale advantage is significant. The company's cooperation with Dongpeng, Haitian, Mengniu and other well-known enterprises continues to deepen, and smoothly develop Yuanqi Forest, Xi Tea and other new customers, while the company expands paper cups, medicine bags and other new tracks, we expect the packaging business to continue to grow steadily in the future.
The rise of domestic aluminum plastic film is imminent, Zijiang customers, significant technical advantages, production capacity continues to release. 1) Industry: aluminum-plastic film is widely used in lithium-ion flexible battery because of its good barrier performance and high flexibility. In 2020, the scale of China's aluminum-plastic film industry reached 4.1 billion yuan, and CAGR2016-2020 reached 22.5%. We believe that the future demand is expected to maintain rapid growth with the improvement of flexible bag battery permeability and policy support. Overseas enterprises have a high market share, but domestic manufacturing advantages build cost advantages, and domestic enterprises are accelerating their rise. 2) Zijiang: the company laid out the aluminum-plastic film business as early as 2004, and realized the full-field application of aluminum-plastic film in 2020. In 2021, the income of aluminum-plastic film business was 370 million yuan, and CAGR2017-2021 reached 28%. The subsidiary Shanghai Zijiang New material has won the title of "specialized and special new", and the company has established a profound cooperative relationship with BYD and other customers by virtue of its technological advantages. By the end of 2021, the company's aluminum-plastic film production capacity has reached 3660 million square meters, leading the industry. We believe that with the new energy production capacity falling one after another in the future, the company's aluminum-plastic film business is expected to expand quickly.
What is the biggest difference between us and the market? We believe that the market underestimates the rise of domestic aluminum-plastic film and Zijiang's production capacity and technical advantages in the aluminum-plastic film industry.
Potential catalysts: new production capacity, high demand from major customers, reduced prices of raw materials.
Profit forecast and valuation
We expect the company to have an EPS of 0.35 yuan / 0.50 yuan and a CAGR of 16.9% in 2023. The current share price is 12 times 2023's PCME. We believe that the company's aluminum and plastic film business is expected to take advantage of the sustained and rapid development of the industry, covering for the first time to give an outperform industry rating and a list price of 8.24 yuan, corresponding to the material business of 25 times Phand E in 2023 and 14 times Phand E in 2023, implying 35% room for growth.
Risk
The risk of raw material price fluctuation; the new capacity is not as expected; the expansion of new customers is not as expected.