Main points of investment:

The company announced its semi-annual report for 2017: the company's 17H1 realized operating income of 2.35 billion yuan, an increase of 39.6% over the same period last year, and its net profit was 236 million yuan, an increase of 33.3% over the same period last year, which was in line with the latest equity dilution EPS of 0.21 yuan per share, which was basically in line with expectations. The net profit after deducting non-return to the mother was 234 million yuan, an increase of 248.4% over the same period last year (vs 2016H1 is mainly investment income). Basic earnings per share was 0.22 yuan, an increase of 37.5% over the same period last year. The single-quarter income of 17Q2 was 1.376 billion yuan, an increase of 48.5% over the same period last year. The net profit of homing Q2 was 106 million yuan, an increase of 628.8% over the same period last year. According to the company announcement, the performance of 17Q1-3 is expected to be 3.46-428 million yuan, an increase of 100.0% 149.0% over the same period last year.

In the first half of the year, production and sales were booming, both volume and price rose, and the company's gross profit margin increased significantly. 17H1 still mainly produces industrial packaging paper and household paper, with an annual production capacity of 1.35 million tons of industrial packaging paper (370 million square meters), 68000 tons of household paper, and more than 600,000 tons of 17H1 cardboard. The operating income of papermaking increased by 39.6% over the same period last year, while that of base paper and cardboard increased by 35.2% and 63.8% respectively over the same period last year, mainly due to the increase in sales prices over the same period last year. Household paper business income increased by 71.9% over the same period last year, mainly due to the increase in sales of household paper base paper. In terms of operation, in the first half of the year, the company's packaging paper continued the business trend of booming production and sales and rising volume and price in the fourth quarter of 2016, the profitability of packaging base paper business increased significantly, and the gross profit margin of 17H1 reached 24.9% (vs16H1:13.1%), which is at a high level in history, with a net profit of about 400 yuan per ton of paper. The gross profit margins of base paper, cartons and household paper are 21.1% (+ 8.4pct), 14.5% (+ 4.3pct) and 1.7% (- 4.5pct), respectively. On a quarter-on-quarter basis, product prices fell from their highs in April, and so did the gross margin per ton of paper, with 17H2's single-quarter comprehensive gross margin of 15.0% (vs 17H1 24.9%).

Box board corrugated paper demand continues to rise, supply side + environmental supervision + waste paper import policy adjustment, papermaking boom continues to improve.

The national and provincial environmental supervision and inspection continued to be under high pressure, and the economy improved throughout the year, benefiting from environmental supervision to promote the elimination of backward production capacity, supply-side contraction driven the improvement of supply and demand in the industry, bringing about an improvement in profit per ton, and the performance of papermaking enterprises is expected to continue to exceed expectations. In terms of box board corrugated paper, China's policy of banning the import of mixed waste paper continues to ferment, which will affect the import of more than 6 million tons of waste paper. at present, the rise of domestic waste and the decline of waste in the United States and Europe are conducive to the continuous improvement of concentration. Demand end box board corrugated application function is more diversified, consumption upgrading promotes the sub-industry to maintain steady growth of about 3%. E-commerce is expected to reach 5 trillion yuan in 2016 (30% industry growth, new demand for containerboard paper more than 1 million tons per year) and cold chain packaging open up another room for growth. In terms of capacity increase, capacity approval as a whole is the trend of lax examination and approval and strict management, and the approval of self-provided power plants / boilers strictly restricts the disorderly expansion of production capacity from the source.

Foreign investment: involved in satellite navigation, environmental protection development, new energy and other high and new technologies, diversification flexibility in the future. The company announced in March 17 that it planned to reduce some of Sharp's shares, which could not be implemented due to window restrictions. at present, the company still holds 24.5 million shares under unlimited conditions of sale. Zhejiang Jingxing Venture Capital, a subsidiary of Shanghai Jingxing Industry, invested 10 million yuan in January 17 to participate in Beidou Tianhui (Beijing) Technology in the form of capital increase. The company is a high-tech enterprise specializing in Beidou satellite navigation technology and R & D. currently owns 1.6826 million shares in the company. Shanghai Jingxing Industries invested 10 million yuan in June 17 to participate in Shanghai Hongji Environmental Protection Technology. The company is mainly engaged in technology development and services in the field of environmental protection technology, and the company holds 927200 shares. Shanghai Jingxing Industries invested 10 million yuan in June 17 to participate in Shanghai Zhida Science and Technology Development. The company is mainly engaged in the field of new energy and new materials, and has a 30% domestic market share in the field of private charging piles.

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. The restricted stock incentive scheme shows the confidence of the management of the company (the grant price is 3.43 yuan). Investment in satellite navigation, environmental protection development, new energy and other high and new technologies, diversification in the future flexibility. Of the net profit of 320 million in 2016, nearly 100 million contributed to the main paper industry, while the rest were non-recurrent gains and losses such as investment income. We estimate that the net profit contribution of the main paper industry in 17-18 will be 497 million, 655 million. Excluding other non-recurrent profits, we maintain profit forecasts of 497 million yuan, 0.58 yuan and 0.67 yuan respectively in 17-19 years. The current stock price of 6.30 yuan corresponds to 14 times, 11 times and 9 times of 17-19 PE respectively.