Incident: On April 28, the company issued an announcement stating that it had signed a repurchase agreement with Gadobo Group to resolve the dispute. With the consent of all parties, Gadobo (Tianjin) invested in COFCO Packaging to buy back 30.58% of COFCO Packaging's shares in Qingyuan Gadobo Herbal and paid the promised dividends. Gadobo (Tianjin) will pay RMB 1,505 million for the share repurchase and a promised dividend of RMB 238 million to resolve the dispute. Cooperation is expected to be further strengthened. On April 28, the company issued an announcement stating that it signed a repurchase agreement with Gadobo Group to resolve the dispute. Gadobo (Tianjin) invests in COFCO Packaging to buy back 30.58% of COFCO Packaging's shares held in Qingyuan Gadobo Herbal and pay the promised dividend. Among them, the repurchase payment method consists of a deposit of 250 million yuan, offset by the amount previously paid to COFCO Packaging by Gadobo Group; the first repurchase price of 500 million yuan, paid by Gadobo (Tianjin) to COFCO Packaging's investment by bank transfer within 10-40 working days after the date of the repurchase agreement; and the second repurchase price of 755 million yuan, paid by bank transfer on or before July 31, 2020. The promised dividend will be paid in 7 installments before December 31, 2021. The repurchase agreement means that the two parties have implemented a dispute solution. On the one hand, this plan will greatly increase the company's cash flow and optimize asset allocation, and promote focus on the main consumer goods packaging industry; on the other hand, the two sides promise to further strengthen strategic cooperation, collaborate on new product research and development to ensure supply safety. The parties agree to prioritize purchasing aluminum beverage cans from COFCO Packaging and/or its related parties within 5 years from the date of signing the repurchase agreement, and pay the purchase price of beverage cans according to the agreed period between the two parties, which is conducive to the steady development of the company's business and reduces the risk of business fluctuations. Aluminum packaging developed rapidly. The 19-year performance exceeded expectations. Market demand increased in 2019, and the company's sales scale increased. The gross margin increased by 0.4 pct to 15.1% compared to 14.7% in 2018, driving a steady increase in the company's overall performance, and the company's performance exceeded expectations. By product, tinplate packaging revenue in 2019 was 3.39 billion yuan, -3.75% year-on-year, accounting for 46.52% of the total share, accounting for a decrease of 6.91 pcts compared to the previous year. The gross margin was 14%, down 0.1 pct from the previous year. Tinplate packaging includes milk powder cans, metal lids, steel drums, etc. Among them, revenue from milk powder cans was 589 million yuan, -0.84%; revenue from metal lids was 492 million yuan, +4.2% year on year; and revenue from steel drums was 882 million yuan, +8.22% year over year. The company maintains a leading position in the industry in many segments of tinplate packaging, and has the highest market share in the country for milk powder cans and unscrewed lids. In 2019, due to the overall downward adjustment of the industry, the company's business was also impacted. By expanding market segments, the company buffered market fluctuations and kept the adverse effects to a small extent. Aluminum packaging products achieved operating revenue of 309 million yuan in 2019, +34.4% year-on-year, accounting for 45.41% of the total share, up 8.07pct from the previous year. The gross margin was about 16.5%, an increase of 0.1 pct. Aluminum packaging includes two-piece cans and single-piece cans. Of these, two-piece cans achieved revenue of 146 million yuan, +38% year-on-year; single-piece cans achieved revenue of 163 million yuan, -9.9% year-on-year. As the beer canning rate gradually increases, downstream beer, carbonated drinks, tea drinks, etc. continue to release demand, and the packaging demand of some customers has moved from tinplate to two-piece cans, further driving the growth of the aluminum packaging sector. In line with market trends, while stabilizing existing production capacity, the company accelerated the new production capacity layout for the two-piece tank business at home and abroad, completed the installation of the Fujian Second Line project in September 19, and officially put into operation at the end of the year; completed the installation of the Belgian project production line at the end of December, and is currently proceeding with follow-up work. With the implementation of the new production capacity layout, the development momentum of the company's aluminum packaging products continues to increase. Plastic packaging products achieved operating income of 588 million yuan in 2019, -3.2% year-on-year, accounting for 8.1% of total revenue, up 1.1 pct from the previous year, and gross margin of 13.4%, up 1.7 pct from the previous year. Plastic packaging includes the packaging of personal care, daily chemical products, etc., benefiting from a 16.7% drop in the price of raw plastic particles, and the company's gross margin of plastic packaging products increased slightly. The company lowered product prices and achieved a 6.9% increase in sales volume. Furthermore, during the current COVID-19 pandemic, the company actively assumed social responsibility. At the end of January, some of the company's plastic packaging plants resumed production to meet the demand for downstream disinfection and epidemic prevention products and contribute to the joint fight against the epidemic. In early February, the company's various subsidiaries gradually resumed work. Currently, most companies have resumed work, and production and operation are gradually resuming. It is expected that with the easing of the epidemic and the release of consumer demand, the company's performance will continue to improve. Investment advice: COFCO Packaging's performance improved significantly in 2019, with aluminum packaging products growing significantly. As the agreement dispute comes to an end, close cooperation between the company and Gadobo Group will further promote the stable development of the company in the future. We expect COFCO Packaging's revenue in 2020-2021 to be 7.807 billion yuan and 8.615 billion yuan, respectively; year-on-year increase of 7.13% and 10.35%; net profit to mother will be 3.33 million yuan and 386 million yuan, up 10.23% and 16.07% year over year; corresponding P/E will be 7.7x and 6.6x, with a P/B valuation of only 0.5. The company's dividend ratio will remain at 50%, and the dividend ratio will reach 6%, maintaining a “buy” rating. Risk warning: The impact of the epidemic exceeded expectations; fluctuations in raw material prices, etc.