The "first share" of the domestic wipes industry ranks among the top three in the export volume of wipes in the country for many years. The company was founded in 1999, mainly engaged in wet towel product research and development, production and sales; the company's main customers are Reckitt Group, Woolworths, Johnson & Johnson, L'Or é al Group, Procter & Gamble Co, 3M Company and other world-famous enterprises. The company has been ploughing in the field of high-end wipes for many years, and with its profound R & D strength, rich production experience of wipes and high-quality global customer resources, it has gradually grown into a leading professional manufacturer of wipes in China. According to the statistics of the Professional Committee of Household Paper of China Papermaking Association, in 2019, the company ranked fifth among national wipes / wipes manufacturers and brands. In 2021, the company's income and return net profit were 980 million yuan and 220 million yuan respectively, an increase of 32.5% and 22.5% respectively over the same period last year. Due to the high base of antibacterial disinfection wipes, the company's income performance declined.

Taking advantage of the upgrading of consumption, the competition pattern is expected to be optimized. The global wipes retail market in 2018 was US $13.6 billion, an increase of 7.9% over the same period last year, of which the Asia-Pacific region ranked third in the world, accounting for 22.7% of the compound growth rate in 2013-2018. In the future, the growth drivers of the wet wipes industry represented by the Asia-Pacific region include: 1) with the expansion of domestic demand and the upgrading of consumption, clean and sanitary products have been widely used; 2) the recovery of the tourism market has led to the expansion of market demand in the wipes industry; 3) the rapid development of the catering industry has led to the development of the wipes industry; and 4) the rigid demand for medical care services and products for the elderly has developed rapidly. According to the forward-looking Industrial Research Institute, China's wipes market is expected to reach 22 billion yuan in 2026, with a compound growth rate of 12% in 21-26 years. The competition pattern of domestic wipes manufacturers is relatively scattered. According to the statistics of the Household Paper Professional Committee of the Papermaking Association, the CR10 in 2020 was 36.8%, an increase of 6.6pct over 19 years. Jieya shares ranked among the top three domestic wipes / wipes manufacturers and brands in 17-19 years. Wipes industry export certification barriers are high, leading manufacturers with product power advantages, economies of scale and customer resources advantages, the pattern is expected to be further optimized.

Technical advantages superimposed high-quality customer resources to build an industry moat. We believe that the company has three core advantages to help steadily improve its market position in the future: (1) strong R & D strength. The company's core R & D team has a superb R & D level, comprehensive technical capabilities, rich practical experience, and the ability to independently develop the core technology of wet towel solution formulation. Through more than 20 years of continuous research and development and technology accumulation, the company has profound technology accumulation in solution formulation, production process and so on, and has mastered a series of core technologies. (2) the company maintains long-term and stable cooperative relationship with high-quality customers. For many years, the company produces and manufactures all kinds of wipes for world-famous enterprises such as Woolworths, Kimberly-Clark Group, Johnson & Johnson Company, L'Or é al Group, 3M Company, Beijin and so on. (3) the advantage of product quality control is outstanding. The company's quality management system has been certified by a number of internationally recognized third-party certification bodies.

Exquisite life drives the expansion of the wet towel market, and cosmetics create the second growth curve. The company has good growth in the future: 1) in the main business of wet towels, the short-term base factor gradually faded, and the epidemic led to a high base number of antibacterial disinfection wipes, and then gradually returned to the pre-epidemic order level; changes in consumption habits and exquisite life concepts in the post-epidemic era are expected to lead to the expansion of the wet towel market, and the company's "new 4.5 billion pieces of" multi-functional "wet towels" can lay the foundation for incremental orders. 2) in terms of new cosmetics business, the company arranges cosmetics business and, on the basis of existing facial masks, hand and foot masks, actively develops OEM businesses such as shampoo and cream with the help of customers' advantages, and continues to expand the category; at the same time, it plans to establish a subsidiary in cooperation with Jiangsu to reorganize the collagen racetrack, which is expected to enjoy 10 billion market dividends and strengthen the layout of cosmetics business. 3) actively expand new customers. Over the past 20 years, the company has actively expanded Rockline Industries, Cole and other new customers. With the adjustment of epidemic prevention policy and the wave of outbound orders of domestic foreign trade enterprises, the company is expected to speed up the process of new customer expansion.

Profit forecast and investment rating: we estimate that the company's income in 2022-24 will be 720 million yuan, 850 million yuan and 990 million yuan respectively, and the net profit will be 180 million yuan, 190 million yuan and 230 million yuan respectively.

At present, the company's share price corresponds to the PE of 17.9x, 16.2x and 13.8x respectively. Considering that the company, as a leading enterprise in the wet towel processing industry, ranks among the top three in the export volume of wet towels in the country for many years, its competitive advantages such as strong R & D strength, close cooperation with high-quality customers and outstanding product quality control advantages, the share is expected to further increase in the future. At the same time, according to Shenwan industry classification, we select robust Medical Care, Kos shares and Zhongshun Jie Rou as comparable companies, and the company's valuation is lower than the average of the three. We are optimistic about the future development of the company, covering it for the first time and giving it a "buy" rating.

Risk factors: the risk of high customer concentration; the risk of rising labor costs; the risk of unsustainable and sharp decline in rapid performance growth; the risk of fluctuations in raw material prices.