Events:

According to the annual report, the company achieved an income of 1.19 billion yuan in 14 years, an increase of 0.29% over the same period last year; the net profit of shareholders belonging to the parent company was 22 million yuan, an increase of 151.8% over the same period last year; equivalent to EPS0.05 yuan, deducting a net profit loss of 17.7 million yuan.

Remarkable achievements have been made in toothpaste upgrading and paper product transformation:

From the perspective of business, the sales revenue of daily chemical products reached 490 million yuan, an increase of 6.7% over the same period last year, of which the sales income of Zanthoxylum nitidum brand toothpaste was 110 million yuan, an increase of 34% over the same period last year. The sales of paper products reached 200 million yuan, up 15.7 percent over the same period last year; the income of sucralose was 340 million yuan, down 14.4 percent; the income of pharmaceutical business was 99 million yuan, up 9.3 percent; the income of household hygiene products was 23 million yuan, down 16.3 percent; the business and trade business declined slightly, with income of 11 million yuan; and real estate income of 1.832 million yuan. In the case of the rapid growth of major businesses such as daily chemical and paper products, the company's total revenue has achieved positive growth.

In 14 years, the company's comprehensive gross profit margin was at a low of 11.7%, down 9.1 percentage points from 13 years. This is mainly due to the reduction of the gross profit margin of paper products and sucralose. In 14 years, the gross profit margin of paper products was-11.7%, and the gross margin of sucralose dropped to 10.1%.

Corporate governance is optimized and the margin of safety is adequate:

In the past 14 years, the company has issued an additional 100 million shares to the actual controller, Liuzhou Industrial Investment, raising 460 million yuan, so that its shareholding has increased from 18.52% to 33.34%, significantly enhancing the level of major shareholders' control over the company's operation and income sharing. The company is in the business transformation period of picking up the rising trend, the core main business toothpaste adheres to the two main lines of traditional Chinese medicine and plants, and the products are upgraded in an all-round way. 80,000 tons of household paper project has also completed the first phase of 20,000 tons of paper sales, and the scale effect appears. The financial assets and land assets held by the company are increasing in value, which can provide an adequate margin of safety.

Profit forecast and valuation:

We estimate the income of the company in 15-17 years is 16.1,19.8 and 2.42 billion yuan, and realize the net profit of 0.64,1.19 and 188 million yuan respectively. Considering the dilution of additional shares, it is equivalent to EPS0.12, 0.22,0.34 yuan.

Give the target price 11.0 yuan and maintain the buy rating.

Risk Tips:

The expansion of the high-end toothpaste consumer market is not as fast as expected.