Main points of investment:

The company announced its annual report in 2016 and the first quarter of 2017, the growth rate of income in a single quarter is large, deducting the high growth of non-net profit. In 2016, the income was 3.681 billion yuan, an increase of 24.6% over the same period last year. The net profit (belonging to shareholders of listed companies) was 319 million yuan, an increase of 2639.6% over the same period last year, which was in line with our expectations. The net profit was deducted from the mother by 141 million, an increase of 1490.1% over the same period last year. Of this total, 16Q4 realized income of 1.156 billion yuan, an increase of 41.6 percent over the same period last year, and net profit (belonging to shareholders of listed companies) was 147 million yuan, an increase of 3279.9 percent over the same period last year. From January to March 2017, the income was 974 million yuan, an increase of 28.7% over the same period last year, and the net profit (belonging to shareholders of listed companies) was 130 million yuan, down 20.1% from the same period last year. In line with our expectations, the mother deducted 129 million of the non-net profit; because the net profit of 16Q1 came almost entirely from the investment income from the disposal of Sharp Ace shares, while all 17Q1 came from the main papermaking industry. 17Q1 deduction non-net profit increased by 214% compared with the same period last year, packaging base paper benefited from the flexibility brought by the price increase, 16Q4Magi 17Q1 led to the high growth of the company's main business performance. The company predicts that the net profit of 17H1 will be about 230 million yuan to 283 million yuan, an increase of 30.0% and 60.0% over the same period last year. The company's allocation plan is 0.7 yuan for every 10 shares.

Box board corrugated paper price rise, the main business performance flexibility. The demand-end box board corrugated industry benefits from the outbreak of e-commerce demand; the supply side benefits from the strengthening of environmental protection and the elimination of backward production capacity, resulting in increased industry concentration. Since the second half of 2016, under the background of the rapid rise in the cost side of waste paper, coal and freight rates, costs have been transmitted rapidly through continuous price increases. The gross profit per ton and net profit per ton have improved significantly, and the single-quarter gross profit margin has reached a new high since its listing: in 2016, the box board corrugated paper revenue increased by 18.2%, the gross profit margin increased by 1.16% to 14.7%, and the comprehensive gross profit margin increased by 13.9%. 2017Q1 benefited from the further rise in the price of packaging base paper, which contributed to the growth of income, and the comprehensive gross profit margin was further raised to 24.9%, a record high since the company was listed for more than a decade, with sales of nearly 250000 tons of base paper in a single quarter. The industry boom is expected to continue high, the company's 1.2 million tons of containerboard paper production capacity will further release the main performance flexibility. Environmental protection has become stricter and large paper mills have benefited. The company is the first batch of enterprises with pollution discharge permit from the Ministry of Environmental Protection (only 19), benefiting from the concentration trend of small factories closing down under the background of tightening environmental protection; using waste paper, enjoying VAT rebate policy since July 2015, VAT rebate 120 million (vs total non-business income 125 million) in 2016, will continue to contribute to performance increment.

Household paper production capacity hit the ground, base paper production and OEM products volume; packaging business to eliminate backward production capacity to improve asset quality. 1) living paper revenue volume, the company last raised 68000 tons of household paper project 16H1 all put into production, 2016 annual household paper output of 44100 tons, capacity utilization of about 75%, achieving sales of 36900 tons, corresponding income of 267 million yuan, an increase of 318.0% over the same period last year. In 2017, we will maintain the base paper-based production structure, develop anti-sensitive, moisturizing and moisturizing series of special Kleenex, and raise the gross interest rate of daily paper. 2) disposal of backward packaging capacity and landing of new high-speed carton lines. In 2016, the company disposed of Zhejiang Jingte, Sichuan Jingte stopped production and leased factories, 100 million square meters of high-speed carton line landed within 16 years, and packaging assets were effectively optimized.

The safety pad of investment income contribution performance and market value valuation. At present, the company holds a total market value of about 650 million yuan for the equity of Sharp Aix, a listed company, and a total market capitalization of about 131 million for the new third board company. The company announced that it will continue to choose an opportunity to sell some of its shares in the second quarter, contributing to investment income; at the same time, the company holds equity interests such as Pinghu Longhua Industry and Beidou Tianhui to obtain stable investment income and become a performance safety pad in the next few years.

Benefiting from the improvement in supply and demand of box board corrugated paper, the company's profit per ton has improved significantly and is expected to maintain a relatively high level in 2017. Packaging base paper prices continue to rise after March adjustment, ton profits remain high, the company's main business cardboard to build a sound performance elasticity.

The restricted stock incentive scheme shows the confidence of the management of the company (the grant price is 3.43 yuan). The contribution of the net profit of the main paper industry in 17-18 years is 350 million, 420 million, and the EPS in 17-18 years is 0.32 yuan and 0.38 yuan respectively, regardless of other non-recurrent profits. The current stock price (6.19 yuan) is 19 and 16 times higher than that of 17-18PE.