Event

The company announced that it plans to build a new cans production line in Bengbu City, Anhui Province. the design capacity of the first phase of the project is 1.1 billion cans per year, and the total investment of the project is estimated to be about 440 million yuan.

Comments:

The new project will improve the market layout and constitute a new growth point in the future. The company will build a new aluminum cans production line and related supporting facilities in Huaiyuan Industrial Park in Bengbu City, Anhui Province, in order to meet the supporting needs of customers in East China and enhance the competitiveness of the company in East China. The two-piece cans are very prone to deformation and other losses in the process of transportation, so the transport radius of the two-piece cans is small and is generally built around the strategic customer factory to meet the packaging needs of customers. At a time when the pattern of the industry is becoming clearer, the company continues to promote capacity expansion, expand and bind quality customers, and help capture the high-quality consumer market in East China. It is estimated that the company will have a production capacity of more than 12 billion cans by 2022.

The demand-driven overlay pattern has improved, and profitability is expected to further improve. (1) demand side: in the first half of 2020, under the influence of COVID-19 's epidemic situation, the national beer and beverage output dropped sharply and then rebounded rapidly. under the impact of the epidemic, the super channel sales of beer and beverage merchants were obviously better than those of catering channels. in addition, due to the rise in glass prices, the cost of glass bottles has increased, the canning rate of beer and beverages has increased, and the demand for two-piece cans has increased rapidly. (2) supply pattern: after the repair of the supply pattern since 2018, the small factories and foreign capital that have expanded too rapidly in the past few years have gradually withdrawn, and the industry pattern has gradually formed an oligopoly, which makes it possible to raise prices. It is expected that in the future, with the further improvement of the pattern and the improvement of canning rate, the profitability of leading enterprises will continue to improve.

Profit forecast: the company continues to improve the production capacity layout in the economically developed areas of the country, strengthen close cooperation with core customers to meet timely and quality needs, and is expected to continue to grow at a high speed under the background of improved supply and demand pattern. We estimate that the company's EPS in 2020-2022 will be 0.28,0.40,0.50 yuan respectively (regardless of the impact of fixed increase on profit for the time being), corresponding to a PE of 30.14x20.72xxx, maintaining the buy rating.

Risk tips: raw material prices fluctuate, the epidemic situation is repeated, and the price increase is not as expected.