Event: the launching ceremony of building a national green development demonstration zone in Beijing City Deputy Center on February 4 was held. At present, a unified national registration and trading system for CCER has been developed, which will provide an important infrastructure guarantee for the construction of a voluntary emission reduction market. On February 16, the company signed a strategic cooperation agreement with Beijing Green Exchange to strengthen cooperation in the fields of ecological and environmental protection, energy conservation and carbon reduction, carbon asset management and development and green finance, further laying the foundation for the company's layout in the carbon sequestration market, waiting for the opening of the CCER approval window and the company's carbon sinks entering the performance cashing period.

Solid core barriers, rich project reserves, forestry carbon sequestration performance is expected to be realized. The company is in the vanguard of forestry carbon sequestration, established the first forestry research center in the domestic paper industry in 2004, and began to develop forestry carbon sequestration in 2016. It has a leading advantage in the technical team, the background of central enterprises, forestry resources and capital reserves. In recent years, the number and scale of carbon sequestration cooperation projects have increased steadily, and the company has continued to enrich the types of carbon sequestration products such as biomass and farmland. at present, the contracted area of forestry carbon sequestration has reached 32.5 million mu, which is expected to reach 50 million mu by the end of 2025. This strategic cooperation agreement promotes cooperation between the company and the Green Stock Exchange in the construction of carbon asset management service platform, research on the path to achieve the goal of "double carbon", green financial innovation and carbon sequestration trading, etc. it will help to further enhance the company's influence and brand image in the carbon sequestration market. At present, the company makes full preparations for the preparation of PDD documents for contracted projects, and reserves the customer resources of large state-owned enterprises in energy, steel and other industries. We expect that the batch of about 2 million tons can be quickly submitted for approval after the opening of the CCER approval window, and the performance is expected to continue to be realized.

The profit of pulp and paper is gradually improved, and the chemical industry continues to contribute to the increase. 1) Papermaking: in terms of cost, the price of coniferous pulp / broadleaf pulp in February is + 0.4% more than the average price of January, respectively. The price of coniferous pulp is strong due to short-term supply disturbance, and the supply of broad-leaf pulp is gradually relaxed. After the commissioning of Arauco and UPM pulp mills, the increase of global pulp supply is expected to reach more than 5%. The contradiction between supply and demand highlights the downward driving price, and the company's cost pressure is gradually alleviated. At present, cultural paper is gradually entering the peak season of bidding for teaching materials and auxiliary teaching materials, and the recovery of demand is expected to show at the end of 2023Q1. The company will carry out two rounds of price increases from February to March, and profits are expected to improve gradually. 2) Chemical industry: the company's new product, high-purity hydrogen peroxide 2022Q3, has been officially put into production, and the new production capacity has been steadily expanded, which is expected to continue to contribute to profit increment.

3) Municipal gardens: the company focuses on high-quality customers, ensures the stability of payback, and further transforms the areas of coastal governance and ecological restoration with high barriers, with steady profit growth expected.

Profit forecast and investment rating. The company's forestry carbon sequestration business relies on the multiple advantages of technical team, background and resources to build barriers, the cooperation Green Exchange to further enhance the influence of the carbon sequestration market, the performance is expected to be realized after the restart of CCER approval, in addition, the profits of the main pulp and paper industry are gradually improved and the chemical industry continues to expand. We estimate that the 2022-24 net profit of the company will be 6.3 million, 72.0 million, and 80 million yuan respectively, corresponding to 20X/17X/16X, corresponding to PE, maintaining the "buy" rating.

Risk tips: repeated epidemic situation, higher-than-expected price increase of raw materials, and lower-than-expected carbon neutralization policy.