Investment suggestion: the company's toothpaste business recovers strongly, and its main business is expected to reverse losses in 2015-2016. Taking into account the impact of papermaking and other business, the company will reduce its EPS:0.08 (- 0.06) / 0.12 (- 0.12) yuan in 2015-2016 and 0.27 yuan in 2017. Considering that the company holds rich financial assets and land assets, the quality of operating assets is good and the core business gradually recovers, we conservatively judge the value of the company's assets by 6.6 billion, raise the target price to 12 yuan, and maintain the rating "overweight".
2014 performance slightly exceeded market expectations, two-sided needle to make a strong business recovery. The annual operating income of the company is 1.19 billion yuan, which is basically the same as the same period last year. The business income of Zanthoxylum nitidum was 490 million yuan, an increase of 6.73% over the same period last year, and the gross profit margin was 18.11%, an increase of 3.67% over 2013. Of this total, the sales revenue of the toothpaste business was 106 million yuan, up 34% from the same period last year. In 2014, EPS was 0.05yuan, the gross profit of sucralose and paper business fell sharply, and the investment income increased by 0.61 yuan, slightly exceeding market expectations. We believe that the company achieved good results in increasing channel investment in Zanthoxylum nitidum toothpaste and launching high-end new products in 2014, with significant increases in toothpaste sales and gross profit margin.
In 2015, the company will further strengthen the investment in brand promotion, and the re-emergence of the Zanthoxylum nitidum brand is expected.
The asset value is seriously undervalued, and the recovery of daily chemical business is expected to promote the return of value. The company's business includes daily chemical, paper and chemical (sucralose), as well as finance (10.56% stake in Liuzhou Bank and 27.4 million shares of CITIC) and land assets (more than 400 mu of high-quality land resources in Liuzhou). We calculate that the reasonable value of its assets is about 6.6 billion yuan (a premium of about 30% over the current market value). We believe that the lack of prominence in the main business is the main reason for the discount of the company's assets, and its asset value is expected to be repaired to a reasonable level with the gradual recovery of the daily business of Zanthoxim.
Risk hint: the effect of channel coverage and marketing is not as expected, and other businesses continue to lose money.