What happened: the third quarterly report showed that the company's operating income in the first three quarters was 2.138 billion yuan, down 1.54% from the same period last year; the company's net profit attributed to the parent company was 7.2895 million yuan, up 18.19% from the same period last year, and 31.17% after deducting non-profit. The 3Q company realized operating income of 806 million yuan, up 9.78% from the previous month, and its net profit was 1.0058 million, down 73.03% from the previous month. The company expects full-year 2015 net profit to range from-50% to-10%, with a range of 5.7 million-10.26 million. Comments:

The industry is weak and the sharp decline in raw material costs has led to a rise in performance: in the past few years, containerboard and corrugated paper are the most prosperous kinds of paper, attracting a lot of capital to invest in the industry, and there is a surplus in the industry. In addition, shocks such as the financial crisis, the European debt crisis and the deterioration of the domestic macro environment have led to weak demand, aggravated the imbalance between supply and demand in the industry, prolonged production capacity digestion time, and continued to lower product prices. The company is one of the largest papermaking enterprises specializing in the production of A-grade Kraft carton paperboard in China, and has a certain leading power in product pricing. In 2015, the price of waste paper, wood pulp and other raw materials fell faster than the price of the company's products, and the gross profit margin improved compared with the same period last year. In the future, the company will expand the proportion of national waste in the raw material structure and further reduce the cost of raw materials.

The production capacity has been put into production in the first half of the year, and the revenue in the second half of the year is expected to increase: in June, the company put into production 300000 tons of low-volume and high-strength corrugated paper, which is expected to contribute 150000 tons this year. After the project is put into production, it will improve the situation of the company's long-term lack of packaging base paper, the target customers are also the company's existing customer groups, and the main products meet the needs of customers to reduce the square cost of carton manufacturing, and the production capacity is expected to be quickly digested after it is put into production. revenue is expected to increase by about 110 million in the second half of the year. In addition, in the construction of the 68000-ton household paper base paper project, the second 30, 000-ton assembly line was officially put into operation at the end of May, and the production line is expected to bring about 50 million revenue increase in the second half of the year. However, the early cost of marketing is relatively large, the initial stage of the project will be based on OEM processing and production, with living base paper sales as the main, reducing marketing pressure.

Optimize the asset structure, peel off bad, and increase investment in emerging industries: the company will dispose of enterprises that are a serious drag on business performance and unable to achieve the business objectives set at the beginning of the investment, in order to optimize the company's asset quality and reduce the pressure on operation and capital. In addition, the company actively invests, with the goal that the investment target can finally be listed. The company completed its investment in the Atek holding Group, accounting for 16.96%. At present, Atek Holdings Group, which made a net profit of 36.4169 million in 2014, has completed its share reform and intends to apply for listing on the new third board. The company, which has a 15 per cent stake in Sharp Ice, is now listed on the main board, and the investment is expected to float at around 1 billion. Recently, the company invests frequently, adding capital to an intelligent machinery company and signing a "letter of intent" with a pharmaceutical intermediate company. The company's investment layout in emerging industries is expected to blossom more.

Profit forecast: overcapacity in the containerboard industry is still serious, after the company's project is put into production, revenue is expanded, and profitability is expected to stabilize under cost control. In addition, the company's investment layout of emerging industries, the use of PE tactics, investment returns are expected to exceed expectations. The company's EPS from 2015 to 2017 is expected to be 0.01,0.05,0.09 yuan respectively, corresponding to 253X PE in 2016, which will not be rated for the time being.

Risk hints: low shareholding ratio of major shareholders; exchange rate fluctuations; investment projects do not meet expectations