Cigarette production and sales warming, product upgrading, driving demand for vacuum aluminized paper and printed matter. In 2016, the cigarette market was adjusted and inventory was optimized, and the production and sales volume declined, and the cigarette market gradually picked up in 2017. In recent years, the proportion of middle and high-end cigarettes represented by Class I and II cigarettes has increased year by year, accounting for nearly 40% in 2017. The company is a domestic leading enterprise of vacuum aluminized paper, and its customers include "China", "Yunyan", "Furong King", "Yuxi", "Hongta Mountain", "Liqun", "Yellow Crane Tower" and other middle and high-end brands. it is expected that the company's vacuum aluminized paper and cigarette printing business will fully benefit from cigarette production and sales recovery and product upgrading.
Industry management tends to be formal, e-cigarette business is expected to come out of the trough. With the rapid development of e-cigarettes in recent years, the global e-cigarette market has expanded rapidly from US $416 million in 2010 to US $7.1 billion in 2016. China's exports of e-cigarettes account for more than 90% of the world's total output. In 2016, the company's e-cigarette business declined rapidly for reasons such as strict access management of e-cigarettes, which had a great impact on the industry, and superimposed factors such as chaos in the domestic e-cigarette market. As the regulation tends to be formal and the rectification efforts are intensified, China's e-cigarette market is expected to develop healthily gradually. As one of the pioneers of domestic e-cigarette, the e-cigarette business is expected to get out of the trough and enter the normal development track.
The strategy cuts into agricultural products, and there is broad room for growth in the future. The company plans to invest in the development of 150000 tons of organic fertilizer plant. At present, the penetration rate of organic fertilizer in China is only 20%, which is a big gap compared with 55% in developed countries. With the improvement of national awareness of environmental protection and the upgrading of agricultural consumption, there is room for future growth of this business.
Develop cloud printing business. In line with the development of the times, the company actively layout cloud printing business. The company has been successful in cloud printing applications and has carried out multi-form cooperation with high-flow platforms such as Didi Taxi, Trip.com and Bank of China Ltd., and business orders have increased steadily.
Expand the new packaging business. The company intends to raise no more than 510 million of funds for environmental protection packaging construction projects and microstructure optical packaging materials projects. The two projects can enrich the company's products and improve production efficiency.
Profit forecast and rating: the net profit for 2017-2019 is expected to be 150 million, 168 million, 199 million yuan, EPS 0.22,0.24,0.29 yuan, maintaining the "overweight" rating.
Risk tips: cigarette production and sales are depressed, new business development is not as expected.