I. Overview of events

The company released a report for the first quarter of 2012: the operating income in the first quarter of 2012 was 679 million yuan, down 14.49% from the same period last year; the net profit attributed to the parent company was 30.8198 million yuan, down 31.78% from the same period last year; the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 30.622 million yuan, down 32.34% from the same period last year; basic earnings per share was 0.06 yuan.

II. Analysis and judgment

It is difficult to improve the prosperity of the industry in the short term, affected by the downturn in the paper industry, and the production capacity of the industrial packaging industry has expanded rapidly in recent years. During the reporting period, the company's product sales and prices decreased compared with the same period last year, resulting in a 14.49% year-on-year decline in revenue and a decline in profitability: the gross profit margin in the first quarter was 15.16%. The net interest rate is 4.77% (in 2011, the huge R & D expenditure of more than 50 million yuan invested by the company in the fourth quarter had a great impact on the company's profitability). At present, there is a lack of confidence in the market, demand continues to shrink, and it is difficult to improve significantly in the short term. It is expected that the sales and prices of the company's products may continue to decline, resulting in a continued decline in the company's revenue and profitability.

The recycled household paper project helps to stabilize cyclical fluctuations. In 2011, the company set an additional investment project of 68000 tons of recycled household paper, and its products have been successfully sold on the shelves in large supermarkets such as Lianhua, Carrefour and Yi Bui in Shanghai in the consumer goods center. at the same time, it has also started selling in special channels (No.1 store), and brand building and channels (special channels and traditional merchants) are still under way. China's household paper market still has a large room for growth in the future. Relevant estimates show that China's household paper consumption will grow at an average annual rate of 7.8% by 2015. The company's investment in household paper projects can improve the company's existing product structure, enhance the company's market competitiveness, and help to stabilize the impact of the company's existing cardboard product cycle fluctuations.

Third, profit forecast and investment suggestions

The company's main product, containerboard, is in a period of low prosperity in the industry, lack of market confidence and shrinking demand. although the company has invested in recycled household paper projects to stabilize the impact of periodic fluctuations, containerboard is still the company's main product. it is difficult to improve the prosperity of the industry in a short period of time. However, the project of recycled household paper still needs time to be put into production, and the market development of new products and new brands needs more resources, although it is conducive to the long-term development of the company, it can not improve the performance of the company in the short term. Given a "neutral" rating, the company's 2012-2014 operating income is expected to be 3.613 billion yuan, 4.013 billion yuan, 4.557 billion yuan, basic earnings per share of 0.21,0.24,03 yuan, a reasonable valuation of 7-9 yuan.

Fourth, risk tips:

1) the prosperity of the industry continues to be low.

2) the progress of recycled household paper project is slow.