Report highlights:
A leading domestic wipes manufacturer that continues to expand its cosmetics business, Tongling Jieya Aviation Products Co., Ltd., was founded in 1999 and entered the Shenzhen Stock Exchange in 2021. It was the first wipes company listed on the GEM. At the same time, the company is also the manufacturer of functional wipes with the most complete product range and the richest range of categories in China. In recent years, the company has gradually expanded its cosmetics business, driving the second growth curve. In 2023, the company and Chuangjian Medical set up a joint venture subsidiary to develop medical dressing products and jointly explore the collagen application market. Driven by increased demand in the wet wipes market in 2017-2021, the company's revenue and Fumu's net profit generally maintained a rapid growth trend. CAGR was 41.86%/71.09% respectively, the company's revenue in 2021 was 994 million yuan, and Guimu's net profit was 220 million yuan.
Industry: The wet wipes market is growing steadily, and there is huge potential for restructuring collagen (1) In 2022, the global wet wipes retail market reached 17.01 billion US dollars, and the Chinese wet wipes market was 12.635 billion yuan. The compound growth rate of 13.23% over the past ten years was a rapid growth rate of 13.23%. In terms of categories, baby wipes are currently the largest segment, and in terms of growth rate, the 2017-2022 compound growth rate of wet toilet paper reached 42.7%, leading the wipes industry. (2) In terms of the collagen market, according to Frost & Sullivan data, China's collagen market is 28.8 billion yuan in 2021 and is expected to grow to 173.8 billion yuan in 2027. Among them, the market size of recombinant collagen products is 10.8 billion yuan in 2021 and is expected to grow to 108.3 billion yuan in 2027. The share of the total collagen market will increase from 37.7% to 62.3% in 2027, leading the collagen market in the future.
Jieya Co., Ltd.: Leading manufacturer of wet wipes, endogenous epitaxial layout of the face value industry (1) Wipes: The company is a national high-tech enterprise that participates in formulating a number of national standards, masters the core technology of wet wipe solution formulations and production processes, and is deeply tied to downstream core customers such as Lijie, Woolworths, Clorox, L'Oréal, Johnson & Johnson, Kimberly, etc., and its export volume has ranked in the top five in the industry for many years. (2) Cosmetics: By entering the cosmetics supply chain for L'Oréal OEM film products, the company established a Shanghai branch and R&D center to empower cosmetics R&D and sales. In 2022, the company and Chuangjian Medical set up a joint venture to lay out collagen, which is expected to achieve complementary advantages.
Investment advice and profit forecasting
The company is a leading wipes manufacturer in China, entering the cosmetics circuit to lay out recombinant collagen. We expect to achieve net profit of 1.64/191/228 million yuan in 2022-2024, EPS of 2.02/2.36/2.81 yuan, and corresponding PE of 20/17/15x for the first time, covering the “buy” rating.
Risk warning
Risk of increased competition in the industry, risk of cosmetics business expansion falling short of expectations, risk of project commissioning falling short of expectations, risk of industry policy regulation