The current situation of the company
Recently, Cofco Packaging has announced that it has reached a strategic cooperation with Jiadobao China, and has recovered all the investment of RMB 1.5 billion and dividends of RMB 50 million in Qingyuan Jiadobao herbs. Jiadoubao has accepted the company as the preferred supplier, accounting for 70-80% of the procurement of packaging products. Under the same conditions, the company has priority to supply two cans, PET and other beverage packaging products.
Comment
1. The arbitration dispute with Jiadobao has finally been settled, reducing the uncertainty of business development. We believe that the settlement of the arbitration dispute between the company and Jiadobao will help the two sides to work together to achieve mutual benefit and win-win results. The recovery of investment funds will also help the company to further enhance its capital strength. As one of the company's important customers, we believe that this strategic cooperation is expected to bring stable order demand for the company's business development, increase the share of cans, and further optimize the two-dimensional layout of the company. promote multi-dimensional production and research and development.
2. Through business cooperation with Feihe Group, intelligent production line layout is expected to bring continuous cost reduction and efficiency. The company continues to deepen the cooperative relationship with major customers, through the "Guangzhongguang model to achieve immediate supply for Feihe Group, while expanding the cooperation between the company and Feihe Group, further promote the upgrading of internal intelligent production capacity. We expect that the realization of intelligent scale production in the future is expected to further reduce the company's operating costs, improve operational efficiency, and strengthen competitive advantages. 3. Pay attention to the price change trend and orders of the two-piece cans. Benefiting from the continuous improvement of supply and demand structure and beer canning rate under the capacity integration of the two-piece can industry, we expect the two-piece can company to rely on the advantages of large-scale production and supply chain. Profit flexibility is expected to gradually emerge in the future, while the company is actively exploring new customer opportunities on the basis of deepening cooperation with existing customers, we believe that it is also expected to drive sustained growth and increase the market share of the two cans. Follow-up needs to focus on tracking the company's orders, as well as the price trend of the two cans.
Valuation proposal
Keep profit forecasts for 2020 and 2021 unchanged. The current share price corresponds to 11.1 / 10.1 times earnings in 2020 / 2021 and maintains a neutral rating. Taking into account the settlement of the arbitration dispute with Jiadobao, we raise our target price by 8% to HK $3.33, corresponding to 10.8 times 2020 price-to-earnings ratio and 9.8 times 2021 price-to-earnings ratio. 2.6% lower than the current share price
Risk.
The price of raw materials fluctuates greatly, and the orders of core customers fluctuate.